Asian Defence Industry: Poised for Growth Amid Global Tensions

With rising geopolitical tensions, defence expenditures globally are soaring. Asian defence firms, particularly those in South Korea, are emerging as strong performers, benefiting from increased exports to Europe and a focus on domestic manufacturing. These firms offer attractive valuations and high earnings growth potential amid shifting investor interests.

The global defence landscape in 2025 was marked by increasing geopolitical tensions, evidenced by U.S. President Donald Trump's military maneuvers in Venezuela and Greenland. This heightened global security environment is driving up defence spending worldwide, notably benefiting Asian defence companies.

Countries across the globe are ramping up their military budgets. The NATO alliance, for example, has pledged to raise their defence expenditure to 5% by 2035. Meanwhile, Japan is planning to double its defence budget by 2027, and South Korean defence firms are leading the charge in arms exports.

Asian companies are not only capitalizing on European demand but are also shifting towards domestic production to reduce import dependency. Despite promising growth, these firms face challenges, particularly in advanced technology fields where American and European companies currently lead.

(With inputs from agencies.)