Global crises such as those in Ukraine and the Middle East, along with sabre-rattling between China and Taiwan, are causing defence spending in many countries to skyrocket. This in turn is filling the coffers of arms manufacturers, something which has brought the industry into sharp focus on the stock market. The value of British company BAE Systems has risen by around 40% within a year, for instance, French company Thales has seen its share price climb by almost two-thirds, and German high-flyer Rheinmetall has surged by more than 250%. On a three-year view, the DAX stock has actually managed to post a massive 860% gain. With the considerable price premiums, the markets are pricing in future growth opportunities. The best example of this is Rheinmetall: the group plans to generate revenue of EURbn 40 to 50 by 2030, which would represent a fourfold increase compared to 2024. To enable it to deliver on its bulging order pipeline, the company is currently even converting factories in the civil division for military purposes.
BAE Systems has no lack of orders either. At the beginning of the year the British conglomerate, known for its weapons systems for land, naval and air forces, was sitting on an order backlog of a whopping GBPbn 77.8, which is almost three times its annual revenue. Demand has remained high in recent months, too: Among the orders received by the British is a USDmn 356 contract for armoured multi-purpose vehicles and two production orders from the US Marine Corps worth a total of more than USDmn 360. “We have made a strong start to 2025,” said CEO Charles Woodburn in a trading statement at the start of May. He is also sticking to the targets of increasing sales by 7% to 9% this year, with earnings per share set to rise by a disproportionate 8% to 10%.
High growth and long-term contracts between the industry and its customers make global defence an attractive investment target. Investors looking for a diversified exposure to this sector will find a suitable solution in the Swissquote Global Defense Index. Rheinmetall and BAE Systems are not the only members of the index: the highly promising structured strategy barometer includes 24 international armaments companies in total. The USA sets the tone from a regional perspective. That is hardly surprising, given that the country also leads the way in global defence spending. Last year this amounted to almost USDtn 1, making up about 3.4% of GDP. Military spending overseas has increased by more than 50% over the last 10 years.
The current heavyweight in the Swissquote Defense Index is Honeywell International. The supplier of protective equipment and sensor technology for the optimal control of military vehicles, aircraft and launch vehicles currently has a market share of 6.5%. At around 2.6%, Saab is the lightweight at the moment. The Swedish aviation and defence contractor is best known for its JAS 39 Gripen fighter jet. This allocation need not stay that way, though, because the index is reweighted every three months. The composition is also monitored and can be adjusted in response to developments on the market. The management fee deducted for the corresponding tracker on the Swissquote Defense Index is a modest 0.7% p.a. The participation securities are offered in USD (ISIN CH0434695026) as a tracker certificate and in CHF (ISIN CH1292091993) as a collateralised ETP+. It should be noted that the Swiss franc version can be traded on both the SIX Swiss Exchange and the BX Swiss. This product is issued by Leonteq. The price of the ETP+ has already risen by more than 8% since it was launched on 8 April 2025. As an ETP+, the product offers a protective function through collateralisation: a pledge is deposited with SIX SIS AG for every exchange traded product. If the price of the ETP rises, Leonteq increases the pledge – and vice versa. If Leonteq gets into payment difficulties, the trustee SIX Repo will sell the pledge and the equivalent of the investment product will then be distributed to the holders of the ETPs.
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