21
MAY 2014
ACT
BUSINESSNEWS
AUTHOR:
CHRISSLEIGHT
is
one of theworld’smost
internationally renowned
construction businesswriters,
with specialist expertise in
financial markets and stock
market analysis. He is editor
of KHL’smarket-leading
International Construction
and
is a regular contributor to
ACT’
s sister publication,
International Cranes
and Specialized
Transport
.
In a reversal of
fortunes over
the previous 18
months, March
and April saw the
heavy equipment
sector rally as the
widermarkets
faltered.
Chris
Sleight
reports.
M
arch andApril
saw shares
in theheavy
equipment sector continue
to rally, even aswider stock
market indicators levelled-
off or fell. Thiswasmuch
against the runover the last 18
months or so,whichhas seen
equipmentmanufacturers lag
behindblue-chipbenchmarks.
like theDow.
Theprevious dynamicwas
thatmainstream stockswere
bought by investors as a safe
haven. This saw theDow and
manyother indicators hit
unprecedented levels, despite
the lackluster economic
picture.
However, since the start
of the year, yields onmore
traditional safehavens have
started to rise,while the
improving economicpicture
has increased investors’
appetite for greater risk and
reward. The sell-off has
not beenhuge yet, but the
levelling-off andbeginnings of
adecline inboth theDow and
S&P500 toward the endof
March could signal the start of
a shift in investment patterns.
Add to this thepolitical
tension inEuropeoverRussia’s
annexationof theCrimea,
in theUkraine, and it isnot
surprising that indicators are
experiencingwobbles.
Economic drivers
In contrast, capital goods
sectors like the the
ACT
HeavyEquipment Index
(
ACT
HEI) have gone from
strength to strength. This
seems tohavebeendriven
bymore fundamental
economic reasons than the
more technical drivers behind
themainstream indicators’
downturn.
Heavy equipment stocks
arebehavingmore rationally,
with shareprices rising in
the expectationof improving
revenues andprofits over
ACT Heavy Equipment Index (HEI)
DOW
NASDAQ
S&P500
40%
35%
30%
25%
20%
15%
10%
5%
0%
5%
-10%
% change
52weeks to April 2014
thenext fewquarters, thanks
to an improvingdomestic
and international economic
picture.
Of course this could all
change. So far the situation in
theUkrainehas onlyprovoked
adiplomatic andpolitical
response againstRussia from
the rest of theworld. Serious
economic sanctionsmay
follow,whichwould likely
trigger a response fromRussia
– at the timeofwriting itwas
making threats to suspendgas
supplies toWesternEurope.
The situation couldget
worse,with a genuine global
economic impact, but fornow
it is reasonably contained.
Meanwhile, theheavy
equipment sector is looking in
muchbetter shape thanonly
a fewmonths ago. It hit its
highest point in three years in
April at 212points and could
goon tobreak its all-time
record around the 220point
mark if the rally continues.
■
ACT’
s Heavy Equipment Index
(HEI) tracks the performance
of eight of America’smost
significant, publicly-traded
construction equipment
manufacturers – Astec
Industries, Caterpillar, CNH,
Deere & Company, Joy Global,
Manitowoc and Terex.
Equipment
sector rallies
