Attempts at peace talks between Russia and Ukraine unsettled the market, leading to a decline in defense companies. August became the first negative month of the year for the Global Security Fund (-3.98%). \n\nThese negotiations temporarily created market concern, as a potential ceasefire or peace agreement could be interpreted as lower defense budgets, which in turn might weigh on valuations in the defense sector. However, this pressure eased somewhat towards the end of the month. <\/p>\n\n\n\n
Our view<\/strong>\u00a0<\/p>\n\n\n\n Attempts at peace talks between Russia and Ukraine unsettled the market, leading to a decline in defense companies. August became the first negative month of the year for the Global Security Fund (-3.98%).\n\nThese negotiations temporarily created market concern, as a potential ceasefire or peace agreement could be interpreted as lower defense budgets, which in turn might weigh on valuations in the defense sector. However, this pressure eased somewhat towards the end of the month.\u00a0<\/p>\n\n\n\n The peace negotiations have so far not resulted in any decisive breakthroughs. Russia maintains its demand for recognition of both the territories it controls, including Crimea, as well as areas it does not control and the occupied regions. Moscow also demands that Ukraine remain neutral, be demilitarized, and that sanctions be lifted. Foreign Minister Lavrov has emphasized that the talks must \u201cacknowledge new territorial realities.\u201d Ukraine rejects these terms and instead demands security guarantees and a ceasefire. The negotiations continue but are essentially deadlocked in a situation of military pressure and diplomatic tension. <\/p>\n\n\n\n Asia<\/strong>\u00a0<\/p>\n\n\n\n During August, the relationship between the U.S. and India weakened significantly. The U.S. first imposed 25% tariffs on Indian goods, which were then raised to 50% as punishment for India\u2019s continued imports of Russian oil. India called these measures \u201cunfair and unfounded\u201d and emphasized its need for strategic independence in energy supply. The conflict has damaged trust and puts pressure on future partnerships, including the Quad.\u00a0<\/p>\n\n\n\n At the end of August, Israel carried out operation Lucky Drop<\/em> At the end of August, Israel carried out Operation Lucky Drop against Houthi leaders in Sanaa, Yemen. At least twelve senior figures, including Prime Minister Ahmed al-Rahawi, the defense minister, and the commander-in-chief, were killed in the strikes. The event marked a significant escalation of the conflict and risks further destabilizing the region. <\/p>\n\n\n\n Company-specific news<\/strong> <\/p>\n\n\n\n Our two largest holdings reported during August, Rheinmetall and ST Engineering, both showing continued strong development despite different short-term challenges. <\/p>\n\n\n\n Rheinmetall posted a somewhat weaker second quarter than expected, with revenue of \u20ac2.43 billion compared to the consensus forecast of \u20ac2.53 billion and operating profit of \u20ac276 million. Despite this short-term deviation, the company confirmed its full-year guidance of 25\u201330% sales growth versus last year. Most impressive was the order book, which rose to a record \u20ac63.2 billion at mid-year. Growth was driven primarily by vehicle systems and weapons & ammunition, where ammunition in particular delivered record first-half sales of \u20ac1.3 billion with a margin exceeding 21%. Rheinmetall is now investing heavily in new production facilities, especially in ammunition and electronics, which temporarily weighs on cash flow but strengthens the company\u2019s strategic position in Europe\u2019s defense build-up. <\/p>\n\n\n\n ST Engineering, one of Asia\u2019s leading defense companies, also delivered a strong second-quarter report. Revenue grew 7% to USD 5.92 billion, while net profit surged 20% to USD 403 million. Margins improved further, with net profit margin rising to 7%. The Defense & Public Security segment stood out with revenue up 12% to USD 2.65 billion. The order book reached USD 31.2 billion at mid-year, including USD 9.1 billion in new contracts, providing strong visibility going forward. The company also continues to strengthen its balance sheet through debt reduction while reshaping its portfolio via divestments worth USD 450 million. Overall, the report demonstrated balanced growth, cost discipline, and a solid position for continued expansion in both defense and civil markets. <\/p>\n\n\n\nAugust 2025 \u2013 Peak Development<\/strong> <\/td> August 2025 \u2013 Lowest Development<\/strong> <\/td><\/tr> NEXTNAV INC. <\/td> 20% <\/td> REDWIRE CORP <\/td> -38% <\/td><\/tr> FINCANTIERI SPA <\/td> 20% <\/td> BIGBEAR.AI, INC. <\/td> -20% <\/td><\/tr> AVIO SPA <\/td> 19% <\/td> KAWASAKI HEAVY IND. <\/td> -19% <\/td><\/tr> AUSTRAL LIMITED <\/td> 18% <\/td> TREND MICRO <\/td> -15% <\/td><\/tr> SATELLOGIC INC <\/td> 14% <\/td> HANWHA SYSTEMS CO., LTD. <\/td> -14% <\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n