Chinese defence stocks witnessed a sharp decline on Thursday, with several names falling up to 4%, following the ceasefire agreement between India and Pakistan that eased concerns over a potential escalation in the conflict. The Hang Seng China A Aerospace & Defence Index dropped for the third consecutive session, losing 1.16%.
Key constituents of the index, including China Aerospace Times Electronics Co. Ltd. (Long March Launch Vehicle Technology Co. Ltd), Bright Laser Technologies, North Industries Group Red Arrow Co., Xi’an Triangle Defense, China Spacesat, Beijing Bei, and AVIC Aircraft, recorded losses ranging between 1% and 4%.
Almost all the stocks in the index were trading in red on Thursday. The index had fallen nearly 2% in the previous session on Wednesday.
Meanwhile, Avic Chengdu Aircraft share price crashed more than 9% in two sessions. Avic Chengdu Aircraft is the maker of J-10 fighter jets, which Pakistan Deputy Prime Minister Ishaq Dar said were used by its air force.
The recent correction comes after an earlier rally in Chinese defence stocks, driven by expectations of increased arms exports to Pakistan. However, sentiment turned bearish amid easing geopolitical tensions and strong messaging from India.
The market reacted to statements from Indian Prime Minister Narendra Modi, who addressed the nation regarding the successful completion of Operation Sindoor. The operation, launched in response to recent cross-border aggression, was hailed by Modi as a demonstration of India’s robust defence capabilities.
Over the past two days, both the Indian Army and the Prime Minister have underscored the effectiveness of indigenous defence systems, such as the Akash Surface-to-Air Missile (SAM) and electronic warfare systems, during the recent conflict. These systems reportedly performed successfully against defence equipment of Chinese origin used by Pakistan.
