Cyber security stocks rise in wake of global 'ransomware' attack

LONDON (Reuters) - A global “ransomware” attack disrupting factories, hospitals, shops and schools spurred investors on Monday to buy stocks expected to benefit from a pickup in cyber security spending by companies and government agencies.

The cyber attack began spreading across the globe on Fridayand by Monday had infected 300,000 computers in more than 150countries.

“These attacks help focus the minds of chief technology officers across corporations to make sure security protocols are up to date, and you often see bookings growth at cyber security companies as a result,” said Neil Campling, head of technology research at Northern Trust.

Investors treated the attack as a buying opportunity for security stocks rather than a cause for concern over the risk it posed to companies, with the pan-European STOXX 600 .STOXX index closing higher and major U.S. indices also up.

In London, shares in cloud network security firm SophosSOPH.L jumped more than 7 percent to a record high and security firm NCC Group NCCG.L rose 2.7 percent.

U.S.-listed shares in cyber security firms FireEye FEYE.O rose 8 percent, and peers Symantec SYMC.O and Palo Alto Networks PANW.N were up around 3 percent.

The cyber security ETF HACK.K rose 3.3 percent.

The attack would "refocus IT attention on updating security infrastructure and procedures" and benefit providers in email, network, and endpoint security, analysts at Wedbush wrote in a research report, highlighting Proofpoint PFPT.O and Splunk SPLK.O as stocks to watch. Proofpoint shares jumped 7.5 percent.

Analysts at Bernstein said desktop virtualization vendors Citrix Systems CTXS.O and VMware VMW.N could indirectly benefit from the upgrade cycle, while defense companies Raytheon RTN.N and BAE Systems BAES.L should similarly get a boost in their commercial cyber security businesses.

Government spending on computer security should also help General Dynamics GD.N, Lockheed Martin LMT.N and Northrop Grumman NOC.N, Bernstein said.

Companies’ spending on cyber security protection is set toincrease 10 percent in Britain and Europe by 2020, according to Brian Lord, a managing director of cyber and technology at cyber security firm PGI, as outdated IT systems get a refresh.

“In many companies, there’s been an increase in investment in IT but not in the security that sits around it, so this investment is likely to play a bit of catch-up,” said Lord, who spent 21 years at UK government intelligence service GCHQ.

The risks of security breaches, particularly when they result in the leak of sensitive customer data, has in the past had a direct impact on share prices as investor confidence is shaken.

“Reducing the cost of security breaches by only 10 percent can save global enterprises $17 billion annually,” MorganStanley said in a report published on Monday.

The U.S. broker upgraded networking equipment giant Cisco Systems CSCO.O to "overweight." Cisco shares, part of the Dow Jones Industrial Average .DJI were up 2.3 percent.

With few pure-play, publicly traded software and network security companies in Europe, a London-listed cyber security exchange-traded fund (ETF) ISPY.L, whose holdings include Cisco and FireEye, was in demand, ending up 3.4 percent.

In Helsinki, Finnish digital security firm F-SecureFSC1V.HE jumped as much as 5.1 percent to a 16-year high.

(To view a graphic on how cyber security ETF beats broader market, click reut.rs/2qJm5sE)

(To view a graphic on how ransomware attack works, where and when it spread , click tmsnrt.rs/2qIUckv)