Stockbroker HSBC Securities has analysed more than a dozen of the smaller listed engineering companies and shown that despite investors giving a wide berth to such stocks, some companies are much less affected than others by the malaise in Asia, the strength of sterling and the spectre of UK manufacturing recession.
HSBC’s figures show, for example, that sales to UK and Asia together amount to less than 45% of sales of companies in this sector. What’s more, the 10% of sales to Asia are not all ‘at risk’, the report says.
For the global economy, the forecast is for growth through 1998 and 1999.
The US economy is forecast to slow by the end of 1999 and any downturn would hit smaller UK engineers. That said, half of these companies’ US business is in the automotive and aerospace sectors, which are less at risk from a downturn in the US.
The region which offers continued strong growth rates with the fewest associated downside risks is Europe, HSBC says. That is good news for smaller engineers, which earn more than a fifth of their revenues in the region.
Despite the strong pound, fears over UK engineers’ ability to compete appear largely exaggerated, the report adds.