FT - April 12 1999
DEFENCE: War dividends
It may seem a little macabre to look for beneficiaries of the Kosovo conflict, but then the stock market is not sentimental. Since Nato started its bombing raids on March 24, shares in British Aerospace and Smiths Industries have climbed nearly 9 per cent, while GKN is up 8 per cent and Raytheon by 7 per cent.
There is cold-blooded logic in this. Jane's, a military research group, estimates that Nato has spent close to $1bn in less than three weeks, most of it on armaments and fuel. The US, for example, has fired off over 150 cruise missiles, made by Lockheed and Boeing at a cost of $1.2m each, as well as losing a $35m stealth fighter, also built by Lockheed. Matra's missiles and Raytheon's laser-guided bombs have also been in action, while the heavy use of warplanes should benefit BAe, Rolls-Royce and the big US defence groups that service them and supply spare parts.
Further out, there may be a "war dividend" if countries reassess their military needs in light of the conflict.
Speculation that Nato will be forced to send in ground troops equipped with fighting vehicles and helicopters has helped buoy GKN, which manufactures both. But if that turns out to be the case, the stock market may have other worries than picking winners among the defence stocks.