Flying high again

15 April 2008

Both Terex and Manitowoc8. Over the four weeks saw their share prices hit record highs in week of February the two companies saw their stock rise 24.12% and 22.35%, respectively. These two stellar performances pushed IC'S Share index up 12.69% to a new high of 590.69 points.

This was all the more remarkable given the weak net gains for the Dow between weeks 4 and 8. Despite hitting a new record of 12846 points around the same time, it gave up most of this growth by the end of the period to finish just 0.51 points higher than it was at the end of week 4.

The FTSE 100 and Nikkei 225 had a better month, with gains of 2.28% and 3.82%, respectively and, it is worth noting, at 18188 points the Nikkei ended week 8 at its highest since early 2000.

Unlike the Dow, though, this is no way near its all-time high of 38957 points, which was hit just before the bubble burst in 1990. So, notwithstanding the recent recovery of the Japanese economy, it clearly has a long way to go to return shareto its former glory – if it ever does.

Crane shares

Terex and Manitowoc's strong performance in February was backed up by useful gains across the sector. Growth range from 4.41% for Palfinger's shares to 9.23% for Hitachi's. All seven of the publicly quoted companies that make up IC's share index out-performed the mainstream Dow, FTSE and Nikkei market indicators in February.

It should also be said that while the Japanese and European manufacturers were outshone by the Americans in February, the reverse was true the previous month. Looking at the first eight weeks of the year, the strongest performances in the sector have been from KCI Konecranes – up 27.6%, Kobe Steel – up 24.8% and Terex – up 20.2%. In contrast, the best performing mainstream index has been the Nikkei 225, which has put on 6.42% since the start of the year.

Outlook

Such strong gains can be a mixed blessing, because there will inevitably come a point when investors decide to sell-up and take their profits out of the market. Such events are often triggered by unfavourable economic news, such as high inflation numbers, rising unemployment or interest rate rises.

So there is clearly the potential for a slump in crane shares in the short to medium term, but the longer term picture still looks good. Corporate profits are rising, and the prime concern of recent months - that last summer¡s slump in US house building was the first sign of recession ¨C seems to have been over-pessimistic.

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