The defense sector turned lower along with the broader market in the afternoon session on July 20, marking its sixth consecutive day of decline. 菲利华 and 宏达电子 saw declines exceeding 10%, while 旭光电子 and 火炬电子 fell by their daily limit, and 航天电子 dropped over 9%.
The popular on-exchange defense ETF, Huabao (512810), accelerated its decline in the afternoon, with its on-market price at one point falling 2% to hit a near one-year low. Notably, during the sector's losing streak last week, funds consistently flowed in, resulting in net subscriptions totaling over 1 billion yuan.
Analyst Perspective on the Sector
A recent weekly report on the defense industry from a securities firm pointed out that an inflection point for domestic demand may be gradually approaching. It favors allocation opportunities in core leading white-chip stocks, with greater potential elasticity seen in new quality combat capabilities. Since June, the report has highlighted the allocation opportunity in traditional defense white-chips, suggesting that pessimistic expectations regarding domestic defense demand have already been largely priced in.
Regarding the current position, the institution continues to see value in a left-side allocation strategy for leading white-chips. The "15th Five-Year Plan" is expected to be finalized in the second half of the year, potentially overlapping with demand from civil aviation (large aircraft & aero-engines) and international business. Furthermore, after the plan's implementation, areas representing new quality combat capabilities—such as unmanned & counter-unmanned equipment, cyber-electronic warfare, and underwater systems—are expected to offer greater elasticity from an expectations perspective.
ETF Product Details
The Huabao Defense ETF (512810), whose code contains "81", passively tracks the CSI Defense Index. It provides comprehensive exposure to popular themes including commercial aerospace, low-altitude economy, large aircraft, MLCCs, defense AI, and gas turbines. It is also eligible for margin trading and the Stock Connect schemes, serving as an efficient tool for one-click investment in core defense assets.
Important Disclosures and Risk Information
Data is sourced from the Shanghai and Shenzhen stock exchanges and public information.
Note: When subscribing for or redeeming fund units, subscription/redemption agents may charge a commission of up to 0.5%, which includes related fees levied by stock exchanges and registration institutions.
Risk Warning: The Huabao Defense ETF passively tracks the CSI Defense Index, which has a base date of December 31, 2004, and was published on December 26, 2013. Constituent stocks mentioned are for illustrative purposes only; descriptions of individual stocks do not constitute any form of investment advice nor represent the holdings or trading动向 of any fund managed by the manager. The composition of the underlying index's constituents is adjusted according to its compilation rules. The fund manager assesses the risk rating of the Huabao Defense ETF as R3-Medium Risk, suitable for investors with a Balanced (C3) or higher risk profile. Any information appearing in this context (including but not limited to individual stocks, commentary, forecasts, charts, indicators, theories, and any form of expression) is for reference only. Investors are responsible for any independent investment decisions. Furthermore, any views, analysis, or forecasts herein do not constitute investment advice of any kind to readers, and no responsibility is accepted for any direct or indirect losses arising from the use of this content. Fund investment carries risks. The past performance of a fund is not indicative of its future results. The performance of other funds managed by the fund manager does not guarantee the performance of this fund. Fund investment requires caution.
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