On September 9, the defense sector extended its strong rally, with the CSI Military Industry Index climbing over 2% intraday. The HuaBao Military ETF (512810), which tracks this index, closed higher on significant volume, reclaiming its 60-day moving average for the first time in three months.

Among constituent stocks, the AVIC and CSSC groups posted broad gains. Hongdu Aviation advanced 5.2%, AVIC Chengdu rose 4.73%, AVIC Shenyang gained 1.66%, while China State Shipbuilding added 1.15% for a fifth consecutive session of gains. China Power Engineering increased 2.35%. Notably, as of today's close, the defense sector has finished higher in 10 of the past 12 trading sessions, suggesting an uptrend may be taking hold.

Where the Opportunity Lies

Guosen Securities issued a fresh note, flagging that the defense industry is set to benefit from a "three-pronged catalyst" spanning the 15th Five-Year Plan, arms trade exports, and the CJ1000 engine program, urging investors to pay close attention to the sector.

First, the 15th Five-Year Plan is poised to drive a realization phase for the sector. With the first year of the plan nearing its end, industrial policy details are on the verge of being finalized. This is expected to clarify the fundamental outlook for the industry, with procurement orders gradually beginning to flow.

Second, the arms trade export cycle is gaining momentum. Escalating global geopolitical conflicts have created firm demand for defense equipment. Chinese military products, validated through real-world use and offering strong cost-performance advantages, are shifting from single-equipment sales to full-system exports. Unmanned aerial vehicles, air defense systems, and precision-guided munitions are emerging as core export drivers, with markets in the Middle East, Southeast Asia, and Africa continuing to expand.

Third, the CJ1000 engine is entering the final stages of airworthiness certification. The CJ-1000A has completed the necessary certification tests and is now in the last phase of approval. With the C919's annual delivery volume expected to steadily climb, upstream and downstream supply chains, including airframe structures, avionics systems, and engines, are poised to benefit comprehensively, with substantial room for domestic substitution.

Why Choose the 'August 1' Military ETF

For investors seeking exposure to the defense sector, the HuaBao Military ETF (512810) - dubbed the "August 1" ETF because its code contains the numbers 8-1-2-8-1-0, echoing China's Army Day on August 1 - passively tracks the CSI Military Industry Index, covering popular themes such as commercial space travel, the low-altitude economy, large aircraft, MLCC, military AI, and gas turbines. It is also a margin trading and Stock Connect eligible vehicle, offering an efficient tool for one-stop investment in core military assets.

Data sources include public information from the Shanghai and Shenzhen stock exchanges and the CSI Index Company. Institutional commentary is drawn from Guosen Securities' September 9 report titled "Defense Sector Faces Three-Pronged Investment Opportunity."

In terms of fees, when investors subscribe or redeem fund shares, the agency may charge a commission of up to 0.5%, which includes fees levied by securities exchanges and registration institutions.

Investors should be aware that the fund manager has assessed the risk level of the HuaBao Military ETF as R3 (medium risk), suitable for balanced (C3) and above investors. The ETF passively tracks the CSI Military Industry Index, which uses December 31, 2004, as its base date and was launched on December 26, 2013. Historical annual returns and annualized volatility for 2021-2025 were as follows: 14.28%/33.05%, -25.74%/23.44%, -11.02%/18.34%, 8.20%/34.39%, and 31.55%/21.43%. Index constituent stocks are adjusted periodically per the index methodology. Past performance is not indicative of future results.

The weighting of any stocks mentioned in this article within the CSI Military Industry Index can be found in the accompanying chart, with data as of July 31, 2026. Stock descriptions are not investment advice of any kind, nor do they represent the holdings or trading activity of any fund under the manager. Index constituents are subject to change according to index rules. Any information appearing in this article (including but not limited to stocks, commentary, forecasts, charts, indicators, theories, or any form of expression) is for reference only. Investors must bear full responsibility for their own investment decisions. Furthermore, any views, analysis, or forecasts in this article do not constitute investment advice of any form toward readers, and the publisher assumes no liability for any direct or indirect losses arising from the use of this content. Fund investment carries risks; past performance does not guarantee future results, and the performance of other funds managed by the fund manager does not guarantee the performance of this fund. Please invest with caution.

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