Edmund Shing explains why he believes the stock of British multinational defence, security and aerospace company BAE Systems is set to soar in 2016.

1) Aerospace and defence industry
BAE Systems operates in the aerospace and defence industry, which is seeing increased spending across the world as the global economy continues to improve.

2) Market value
It is a FTSE 100 company (UK Code: BA.) with a market value of £15bn ($22bn, €21bn).

3) Global reach
BAE Systems is very active in several regions across the world, including the US, the UK and oil-rich Saudi Arabia.

4) Increased Nato and Middle East spending
We're seeing military aircraft, tanks, missiles and security spending benefiting from higher Nato and Middle East spending in 2016 – all of which should lead to increased profits for BAE Systems next year.

5) It's cheap
It is a cheap stock with a P/E Ratio of only 12.42 (as of 31 December 2014) and an income yield of 4.7 % (as of 21 December 2015).

Edmund Shing is Global Head of Equity Derivative Strategy at BNP Paribas in London. He holds a PhD in Artificial Intelligence.

LON:BA