The defense sector continued its weak, range-bound performance on June 11th. The core asset of the sector, Huabao Fund's Defense ETF (512810), hit a new intraday low for the year. Constituent stocks showed significant divergence, with shares in commercial aerospace, MLCC, and gas turbine sectors suffering heavy losses. BLT, Greatwall Military Industry, Hongyuan Electronics, and China Shipbuilding Industry Group Power Co.,Ltd. (ASX: 600482) all fell by over 5%. In contrast, Chongqing Zonsen Power Machinery Co.,Ltd. (ASX: 001696) surged, marking its third limit-up in four trading sessions, while Xuguang Electronics hit the daily limit-up, reaching a new all-time high.
Analysis suggests that the overnight plunge in U.S. tech stocks may have dampened market sentiment. Combined with major upcoming events such as SpaceX's potential listing and the mid-June FOMC meeting, expectations for global liquidity tightening have rapidly intensified, leading to heightened volatility in growth-oriented tech stocks. However, some analysts, like those from Founder Securities, maintain a generally optimistic outlook for the third quarter, viewing the current adjustment as a potential opportunity for strategic positioning.
Evaluating the Defense Sector's Investment Potential
Regarding the investment value of the defense industry, a research report from Guoxin Securities points out that global military spending continues to expand, with China's defense budget maintaining steady growth. The 15th Five-Year Plan provides a comprehensive framework for the high-quality advancement of national defense and military modernization. The development of new-domain and high-quality combat capabilities will accelerate the upgrade and replacement of advanced weaponry and equipment, ushering in a new development phase for the defense equipment industry. In recent years, China's global competitiveness in sectors like shipbuilding, aerospace, and satellite navigation has continuously improved. The national defense and military industry is a crucial direction for breakthroughs in new quality productive forces, offering broad industry prospects. The report recommends focusing on companies within the aerospace equipment industry chain, including leading firms in aircraft manufacturing, aero-engines, and military electronics and information technology.
It is worth noting that next Monday, June 15th, the rebalancing of the CSI Defense Index, which the Huabao Fund's Defense ETF (512810) tracks, will take effect. This rebalancing involves adding four stocks and removing two, bringing the total number of constituents back to 80. Fushun Special Steel and Liujiu Yier will be removed, while Aerospace Huanyu, Tianyin Electromechanical, Jiachi Technology, and Dongtu Technology will be added.
Profile of the New Index Constituents
Specifically, the four new members are all leading companies in the military-civilian integration field, each with a market capitalization in the tens of billions. They are expected to add over 30 billion yuan in total market value to the index. Aerospace Huanyu focuses on aerospace products and tooling, Tianyin Electromechanical spans home appliance components and radar electronics, Jiachi Technology specializes deeply in the high-barrier niche of stealth materials, and Dongtu Technology is based in the underlying technologies of industrial internet.
Investment Considerations and Risk Disclosures
The fund, which tracks the CSI Defense Index, provides broad coverage of popular themes including commercial aerospace, MLCC, gas turbines, military AI, and large aircraft. It is also eligible for margin trading and Stock Connect programs, positioning it as an efficient tool for investing in core defense assets.
Investors should note that subscription and redemption agents may charge a commission of up to 0.5% for fund share transactions, which includes fees levied by stock exchanges and registration institutions.
Risk warnings indicate that the fund passively tracks the CSI Defense Index. The index's base date is December 31, 2004, and it was launched on December 26, 2013. Constituent stocks mentioned are for illustrative purposes only; individual stock descriptions do not constitute investment advice of any form, nor do they represent the holdings or trading trends of any fund managed by the fund manager. The composition of the underlying index is adjusted according to its compilation rules. The fund manager assesses the risk rating of this ETF as R3 (Medium Risk), suitable for investors with a Balanced (C3) risk profile or higher. All information presented is for reference only, and investors are responsible for their own investment decisions. The views, analysis, and forecasts herein do not constitute investment advice to readers, and no responsibility is taken for any direct or indirect losses resulting from the use of this content. Fund investment carries risks; past performance of a fund does not guarantee its future results, and the performance of other funds managed by the same manager does not guarantee the performance of this fund. Caution is advised in fund investment.
Comments