These days, in many ways, a new era is beginning. Meteorologically, spring is driving away Father Frost, economically, a multi-billion-euro program from the German federal government is raising hopes for an economic revival, and geopolitically, the balance of power is shifting. On top of that, there’s a tariff hammer from the US government, which is confronting the world with new realities. Internally, there is also an epoch-making innovation: Leonteq is entering the world of structured leverage products. With efficient derivatives, investors can now achieve significant impact with a small investment. They have full flexibility: speculations can be made both on rising (Long) and falling (Short) prices, and different leverage options are available to match individual risk preferences. This allows for disproportionate gains from price movements in a variety of underlying assets. Currently, defense stocks are all the rage. Driven by geopolitical tensions, global rearmament is underway, which in turn is leading to booming profits and full order books in the defense sector.
The flood of orders could even accelerate further, particularly in Europe. Here, the industry is gaining momentum from the investments mentioned earlier in Germany. But the entire EU also plans to expand its stock of military assets. Brussels intends to allocate a hefty EUR 800 billion for defense by the end of the decade. According to analysts at JPMorgan, the old continent is facing a decades-long rearmament cycle. The experts expect the European defense sector to experience an average revenue growth of at least double digits in percentage terms over the next 5 to 10 years.
For industry players such as Rheinmetall, Renk, and Hensoldt, these are promising times, even though they are already working at full capacity due to the war in Ukraine. To meet the booming demand, Europe’s leading ammunition manufacturer, Rheinmetall, is currently considering converting parts of its civilian production for the automotive industry into military manufacturing. Under the motto "war technology instead of passenger cars," there is even discussion about taking over certain VW production facilities to expand capacity. Speaking of VW: In mid-March, after an unprecedented rally, Rheinmetall surpassed Europe's largest car manufacturer in market value. Since New Year's, the share price of the DAX-listed company has more than doubled.
A similar short-term price dynamic is being exhibited by competitors Hensoldt and Renk. These two companies also aim to take a slice of the billion-dollar defense pie. To improve the country's defense capabilities, Hensoldt is focusing on high technology. The provider of military radar and reconnaissance systems is currently expanding its manufacturing and aims to more than double its revenue to EUR 5 billion by 2030. The goal seems quite realistic, as the order intake last year surged by 39% to EUR 2.9 billion amid the European rearmament.
Amid the defense boom, Renk, a newcomer to the stock exchange, has recently been promoted. The tank transmission manufacturer’s stock has been added to the German mid-cap index MDAX, putting it on equal footing with Hensoldt. The Bavarians also have no shortage of work. In the VMS segment, where vehicle transmissions for military tracked vehicles like battle tanks are produced, three major orders arrived in the fourth quarter of 2024. Overall, the company reported a record order intake of EUR 1.4 billion at the end of 2024. The positive trend continues into the new year: In January and February, Renk secured nearly EUR 50 million in orders in the maritime sector, including propulsion systems for patrol and supply ships as well as frigates for European customers. CEO Susanne Wiegand believes Renk is ideally positioned to take advantage of the growth opportunities that lie ahead.
The recent dynamic price development of the German defense trio caused "flagpoles" in the charts. However, such stocks are particularly susceptible to market corrections. This was evident during the recent stock market shake-up triggered by the massive US tariff increases. On "Black Monday" this week, Rheinmetall's stock lost more than a fifth of its value at the start of trading and even dropped into the three-digit price range. However, investors quickly regained their composure, as the war in Ukraine and global rearmament remain the key factors for the defense industry, and thus Rheinmetall, along with its two industry peers, was able to recover most of its initial losses.
Such price movements can be turned into returns using leverage products. Regardless of the direction the stocks take, risk-tolerant investors can play both sides profitably with long and short products. Leonteq has included the three currently trending defense stocks—Rheinmetall, Renk, and Hensoldt—as underlying assets in its product selection to kickstart its derivatives business. Warrants with Knock-Out, also known as turbo certificates, as well as mini futures, are offered. Investors have a variety of long and short solutions to choose from for Rheinmetall. For the MDAX members Renk and Hensoldt, Leonteq is the first issuer in Switzerland to offer mini futures on these exciting underlying assets. Speculations on both rising and falling quotes are also possible here.
Conclusion: Leonteq's new leverage products have many advantages. They allow investors to accompany pronounced trend developments with a multiplier or take advantage of short-term price movements. Additionally, investors have full flexibility regarding the expected price direction. In particularly volatile times, it can be crucial to be on the right side. However, these opportunities also come with risks. In the event of a Knock-Out or Stop-Loss, there can even be a total loss. Therefore, it is essential not only to have a clear opinion on the underlying asset but also to monitor the market environment closely, ensuring the capital invested aligns with the portfolio size.
We look forward to answering all of your questions about our products and how they are traded. Please don't hesitate to get in touch! Phone: 058 800 11 11, email info@leonteq.com or contact us here.