IC September 2009 Business news: still climbing

Crane industry shares rallied for the sixth straight month in August, as the markets continued to be buoyed by better than expected second-half results. Chris Sleight reports

Just when the stock market rally looked like it was running out of steam, share prices found another high. As with the previous months' gains, this seemed to be driven by up-beat financial results for the second half of the year, with many European companies reporting in late August, as opposed to the late July results season in the US.

The lifting sector had a particularly good time in August, with IC's Share Index for the industry rising 9.64% - a gain that outstripped those of all the major benchmark indicators. The closest to this performance was the FTSE 100's 6.67% rise over the same period between weeks 30 and 35.

The Dow's gain of 5.36% was more lacklustre, but still positive. The normally more dynamic Nikkei gained only 4.42%, perhaps as a sign of nervousness ahead of Japan's general election, which was scheduled for the end of week 35.

Not only was this the steepest month-on-month rise for the index since April, it was also the first time, over the course of the rally, that the lifting sector's gains had beaten those of all the mainstream benchmarks.

The standout stock in the lifting sector in August was Palfinger. Although half-year results showed its revenues down 36%, it managed to make a profit in the first half of the year, and investors may also have been heartened by its assertions that the market has now bottomed-out.

The other strong risers were Terex and Hitachi, although these weren't driven by any specific events, but seem to have risen on the back of general market buoyancy.

All of the other companies that make up IC's Share Index had more limited gains. The only stock to fall over the five-week period was Kobe Steel, with a marginal 1.69% drop.

Long view

The continued rally in August pushed the IC Share Index firmly into the black for the year to date, with a rise of just over 15%. This is about in line with the Nikkei's performance over the course of 2009, and well ahead of the Dow and FTSE, which are up only about 6%.

As the comparison to a year ago shows, however, there is still a long way to go. Compared to the end of August 2008, the IC Share Index is still some 35% lower. The big fall, of course, came in September last year following the collapse of Lehman Bros. What this tells us is that despite a steady and almost uninterrupted rally since mid-March, the crane sector still has to put on more than that amount of growth again if it is to recover to pre Lehman Bros. levels.

For that to happen end markets will have to start picking up again. Second half results may have been better than expected (or perhaps not as bad as feared), but that has been a result of corporate cost cutting. There are early signs of a recovery in some markets, but they will have to become more tangible if the rally is to continue.