Trump "gives up protection" for Europe, completely igniting global defense stocks!

With Trump suspending military aid to Ukraine, Europe is forced to rethink its defense situation, and global military stocks are experiencing an unprecedented surge.

Data shows that since the beginning of this year, Rheinmetall in Germany has become the best-performing stock in the MSCI World Index, while the stock price of South Korea's largest defense group Hanwha Aerospace subsidiary Hanwha Ocean has soared over 100%, leading its Asian peers.

On March 4th, according to CCTV News, the US-Ukrainian conflict has sounded the alarm for all of Europe. In the face of the Trump administration's "America First" policy and "transactional diplomacy," Europe has no choice but to accelerate the process of strategic autonomy in security. US Secretary of Defense Lloyd Austin has made it clear that the US will no longer "primarily focus" on European security, and maintaining European security and assisting Ukraine must be the responsibility of NATO's European member states.

Analysts point out that the Trump administration's shift in traditional security alliance policy is driving countries around the world to increase defense spending and shifting investors' attention to Asian contractors that can provide weapons and equipment more quickly and economically.

Keith Bortoluzzi, Managing Director of Impactfull Partners, stated:

"Trump's message is clear: we will not protect you—you have to rely on yourselves. This will lead Europe to accelerate the development of its defense industry."

In response to the new situation, European Commission President Ursula von der Leyen announced on Tuesday that the EU will propose providing €150 billion (approximately $158 billion) in loans to boost defense spending. Meanwhile, Germany's incoming Chancellor Friedrich Merz plans to establish a €500 billion fund as part of policy reforms to address urgent investments in the defense sector. Rheinmetall's stock price hit a historic high of €1,144.50 on Monday. Notably, during the outbreak of the Russia-Ukraine conflict, the company's stock price was less than €100.

As traders weigh the impact of Europe's commitment to providing weapons to Ukraine, Trump's decision to suspend aid to Ukraine has triggered another round of increases in Asian defense stocks. Japanese heavy machinery manufacturer IHI's stock price surged to its highest point since 1990 on Tuesday, while South Korean main battle tank manufacturer Hyundai Rotem's stock price soared by 11%.

Meanwhile, this fierce surge has led to a significant increase in valuations. Hanwha Ocean currently has a projected price-to-earnings ratio of 52 times, while Hanwha Aerospace and Rheinmetall have multiples of 20 times and 37 times, respectively. However, analysts believe that considering the anticipated increase in security spending, investors still have ample reason to remain optimistic. **

A research report from Bank of America shows that John Phelan, the Navy Secretary nominated by Trump, plans to utilize the capacity and technology of allied shipyards, either as a contract manufacturer or as an investor in U.S. facilities. The bank believes that Hanwha Ocean is the most likely to secure U.S. Navy contracts among South Korean shipyards.

Jung In Yun, CEO of Fibonacci Asset Management Global Pte, stated:

"The perception that the U.S. no longer provides protection for free will prompt other European countries to increase their defense budgets. A series of factors have laid the foundation for higher revenue levels for South Korean defense stocks in the coming years."