Market Strategist
Summary: The Australia, UK and US defence alliance nears implementation after forming 18 months ago, with the country heads to meet and progress their multibillion trilateral defence deal. This may include Australia buying as many as five US Virginia class nuclear-powered submarines in the 2030s. This reinforces NATO’s drive of encouraging countries to spend 2 per cent of national spending on defence. For the investor, it makes one reflect on the capital being spent in the industry, which may present as a potential investment opportunity to explore.
The US and UK are said to be providing Australia with technology and capabilities to deploy the nuclear-powered submarines, which will be based in Australia, given its proximity to the Western Pacific and Indian Ocean. The fleet will also bolster the US submarine presence already there.
This is according to Vice Admiral Jonathan Mead, who has headed the 18-month-long taskforce to acquire the nuclear-powered submarines. It is also expected to generate 10,000 jobs for Australia, which is double what the French project would require.
Adelaide in South Australia, has been ear-marked as the destination to build a shipyard, fit-for constructing nuclear-powered submarines. But hiring workers who are nuclear aware, competent and nuclear experts will prove one of the most difficult challenges of the project, according to Vice Admiral Mead,.
Although we don’t know the financial outlay involved exactly, this alliance underscores the importance of reflecting on the monumental investment in the defence sector. For Australia alone, the AUKUS alliance marks the country’s biggest-ever defence project.
This also follows Australia separately announcing it will double its Royal Australian Airforce cargo fleet, after signing a A$10 billion US military deal, to buy 24 Hercules planes. The cargo planes have historically moved troops, transported equipment in and out of war zones and evacuated civilians. Hercules planes have also made countless humanitarian flights to offer supplies to countries hit by natural disasters.
Potential companies that could be involved in producing the nuclear-submarines, include a major submarine maker, Northrop Grumman. Lockheed Martin is the world’s largest defence company, and the US government’s biggest defence contractor. Lockheed is also the producer of Hercules planes.
Given the rising cashflows and earnings in Defence companies, we've seen Defence shares outperform the market.
Saxo’s Defence equity theme basket has produced some of the best returns year-on-year, among all the baskets we track, with a gain of 25%.
You can also explore some of the largest nuclear energy producers, via Saxo's Nuclear Power equity theme baskets.
A new fragmented world order can render some of today's infrastructure obselete, but it also calls for massive new investments across the globe, which requires a new set of strategic and tactical investment strategies.
Steen Jakobsen,
Chief Investment Officer
As globalisation turns to fragmentation, China seems set on playing a role in the global economy, while simultaneously working towards proofing its own economic situation from external shocks and crises.
Redmond Wong,
Market Strategist
The recent bank runs and ensuing challenges are reminicent of something we've seen before. Will it end like the S&L crises of 1986 and 1995?
Chris Dembik,
Head of Macroeconomic Research
Equity markets need to recalibrate to another - fragmented - global world. What's your view on equities in this market - are they going up or down?
Peter Garnry,
Head of Equity Strategy
With every development comes new opportunites, some of which could be in India. Have you considered the country as a part of your diversification strategy?
Charu Chanana,
Market Strategist
A collar is an option strategy that allows some protection while maintaining some upside potential. What investment would you like to use a collar strategy for?
Hans Oudshoorn,
Trainer Academy
There are arguments to be made for many commodities to have upside. Which are you paying the most attention to this quarter?
Ole S. Hansen,
Head of Commodity Strategy
In a very challenging macro environment, which currencies do you think will come out on top?
John J. Hardy,
Head of FX Strategy
Disclaimer
The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.
Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-gb/legal/disclaimer/saxo-disclaimer)
