The military industrial sector staged a dramatic V-shaped reversal on June 22nd. The core military assets fund, HuaBao Military Industry ETF (512810), initially fell over 2.5% in the morning session but managed a powerful afternoon recovery, ultimately closing in positive territory to secure its seventh consecutive day of gains. It successfully reclaimed its annual moving average, with an intraday amplitude exceeding 3% and trading volume surpassing 34 million yuan.
Constituent stock performance was mixed. Huafeng Technology and Aerospace Electric Appliance led the declines, falling 6.59% and 5.27% respectively. Guangqi Technology continued its slide, dropping 4.8% to hit a new near-one-year low. However, there were notable bright spots. Xuguang Electronics surged to the daily limit-up for its fifth consecutive session, achieving six limit-up days in the past seven trading days. Zhongbing Hongjian also hit the limit-up in the afternoon, while the large-cap stock AECC Aviation Power rose 6.61%.
In response to the sharp stock price movements, Xuguang Electronics issued a clarification. Following the market close on the 18th, the company announced it had noted some media categorizing it under concepts related to 'controlled nuclear fusion' and 'aluminum nitride'. From the beginning of 2026 to date, the company's controlled nuclear fusion-related products have not been delivered or generated revenue. In Q1 2026, aluminum nitride-related products accounted for approximately 5% of total operating revenue, a relatively small proportion that is not expected to have a significant impact on current operating performance.
This marks the third urgent clarification issued by Xuguang Electronics since June this year. Since the start of June, the company's stock price has cumulatively surged 107.97%, more than doubling in value.
It is noteworthy that the military sector has seen a frequent emergence of strong performers this year, with consecutive limit-up stocks appearing one after another in June alone. The underlying reason is that the civilian application of military technology is powerfully giving rise to new industries, making the sector's thematic landscape particularly rich, covering areas such as commercial aerospace, controlled nuclear fusion, gas turbines, and MLCCs.
An analysis suggests focusing on opportunities in military trade, aero-engines, commercial aerospace/space, and equipment intelligence.
In the short term, due to the high certainty of demand growth for the localization of commercial aerospace and commercial aviation over the next five years, and the fact that both sectors represent manufacturing markets worth hundreds of billions, they are expected to continue receiving market favor. Furthermore, with 2026 being the first year of the 15th Five-Year Plan, main equipment manufacturers are expected to initiate a new inventory cycle, with upstream segments of the industrial chain benefiting first, potentially seeing order traction starting as early as Q4 2026.
From a medium-term perspective, military trade demand is facing a significant inflection point, driving a simultaneous increase in both the volume and value of total equipment demand, with main contractors and key subsystem manufacturers standing to benefit notably. The strong demand for AI on the power generation side is expected to sustain strength in the gas turbine industrial chain.
Long-term, the focus is on the important milestone of the 100th anniversary of the People's Liberation Army in 2027. Defense expenditure is expected to maintain a relatively high growth rate of around 7%. Coupled with the accelerated iteration of a new generation of main combat equipment and the leap in demand for new quality combat capabilities, the industry's high prosperity is likely to continue.
Regarding allocation timing, as of now, the overall valuation (TTM) of the CSI Military Industry Index, which the HuaBao Military Industry ETF (512810) tracks, stands at 71.05 times. This is below its valuation center of 71.32 times, with a valuation percentile of 49.35%, indicating a gradually improving investment value proposition.
The HuaBao Military Industry ETF (512810), whose code contains the numbers for 'August 1st', passively tracks the CSI Military Industry Index. It provides comprehensive coverage of popular themes including commercial aerospace, gas turbines, MLCCs, military AI, the low-altitude economy, and large aircraft. It is also eligible for margin trading and the Stock Connect schemes, serving as an efficient tool for one-click investment in core military assets.
A special note regarding the rebalancing of the HuaBao Military Industry ETF (512810): The rebalancing of its underlying CSI Military Industry Index took effect starting June 15th. Fushun Special Steel and Liujiu Yier were removed, while Aerospace Huanyu, Tianyin Electromechanical, Jiachi Technology, and Eastone Century Technology were added, bringing the total number of constituents back to 80.
All four new members are leading companies in the civil-military integration field with market capitalizations in the tens of billions, collectively adding over 30 billion yuan in market cap to the index. Aerospace Huanyu focuses on aerospace products and tooling, Tianyin Electromechanical spans home appliance components and radar electronics, Jiachi Technology specializes in the high-barrier niche of stealth materials, and Eastone Century Technology is grounded in the underlying technology of industrial internet.
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