Intermoney | The German media Spiegel published a report on Monday in which they mentioned that Brussels is considering imposing some kind of measure on arms giants to prevent billions of euros of public money being invested from ending up directly in the pockets of shareholders. These measures could range from taxes on extraordinary profits to partial nationalisations of the companies or stricter contracts with fixed prices.
The German company Rheinmeall reacted negatively, dropping -3.50%. Two other German arms companies, Renk and Hensoldt, also reacted negatively, dropping -3.2% and -4.7% respectively.
Assessment: Negative news for the sector, which, if realised, could cool its growth expectations. It is clear that expectations for the sector remain very positive for the coming months and that a lot of money is going to be invested in it, but we believe that this potential growth is already largely discounted and that regulatory risks could mean that expectations are not met. Increasing defence spending in such indebted and ageing countries will put their fiscal solvency at risk and can only be done with regulatory measures such as those mentioned in the article or by raising taxes considerably. And people are usually fine with increased defence spending until you hit them in the pocket. Indra (Manterner, P.O €33/share).
