(Bloomberg) — Washington has made it clear that Europe needs to defend itself. For some investors, that’s a call to load up on defense stocks.
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Security-related shares have been on a tear this year, with Germany’s Rheinmetall AG (RHM.DE) ranking as the best-performer in the MSCI World Index as money managers anticipate a jump in military spending. The buzz has spilled over into Asia, where South Korea’s Hanwha Aerospace Co (012450.KS). and its unit Hanwha Ocean Co (042660.KS). have both rallied over 100% to beat all their regional peers.
US President Donald Trump’s shift in traditional security alliances is driving a new commitment to defense spending and training the spotlight on Asian contractors which are able to deliver weapons faster and cheaper than their rivals. The pivot to these shares first gained traction during the Russia-Ukraine war and Trump’s decision to pause military aid to Ukraine will reinforce the move.
“Trump is saying if Russia is attacking you, we’re not protecting you — you are on your own,” said Keith Bortoluzzi, managing director at Impactfull Partners, an advisory firm for investment companies. It’s going to lead to “Europe having to ramp up their defense industry,” he said.
The European Union will propose extending €150 billion ($158 billion) in loans to boost defense spending, European Commission President Ursula von der Leyen said Tuesday. Germany will set up a €500 billion fund as part of a policy overhaul to tackle urgently-needed investments in defense, according to chancellor-in-waiting Friedrich Merz.
Against this backdrop, Rheinmetall’s shares have surged more than 80% this year and reached a record €1,144.50 on Monday. They traded at less than €100 before Russia invaded Ukraine.
Similarly the stock of Hanwha Aerospace, South Korea’s leading defense contractor, hit a series of all-time highs in 2025 after more than doubling last year. Shipmaker Hanwha Ocean’s shares have climbed 115% since end-December. The gains have added $21 billion to the market value of the two stocks this year.
Trump’s move to pause aid to Ukraine set off another rally in Asia’s defense stocks, as traders weighed a pledge by Europe to support Ukraine with weaponry. In Japan, the shares of heavy machinery maker IHI Corp. jumped to the highest since 1990.
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