According to the Zheshang Securities, defense stocks lead the gains. As of the time of writing, China Aerospace (00031) increased by 94.12%, trading at HKD 0.65; Con Aero Tech Holding (00232) increased by 26.06%, trading at HKD 0.179; Avichina (02357) increased by 18.18%, trading at HKD 5.07; CSSC Offshore & Marine Engineering (00317) increased by 7.43%, trading at HKD 15.04.

Zhengshang Securities pointed out that the military industry sector has shown a clear downturn in fundamentals since Q4 2023, mainly due to the continuous delay in industry demand rhythm. Currently, the sector's inventory has gradually bottomed out, and the industry will start a new inventory cycle with subsequent order placements, signaling an imminent recovery of the entire industry chain. We believe that the performance in the mid-2024 interim report meets market expectations. The focus remains on the pace of order placements. Recently, many listed military industry companies have disclosed order contract announcements, indicating that the industry recovery may have begun. We believe that it is essential to seize the opportunities for military industry layout at present.

Zheshang Securities pointed out that the successful launch of intercontinental missiles in the near term demonstrates strategic deterrence capabilities. The conflict in the Middle East may affect regional or global military dynamics, which is expected to increase attention on the national defense military industry sector. Looking towards the second half of 2024, a new upward cycle is anticipated. The national defense military industry sector has a certain planned nature, and the sector index has adjusted to the early stages of the 14th Five-Year Plan. With some disruptive factors gradually being eliminated, the industry fundamentals are expected to improve.