Core Viewpoint - The aerospace and defense sector is experiencing fluctuations, with the aerospace ETF (159227) showing a decline of 2.18% as of 9:55 AM on September 4, despite a significant net inflow of over 314 million yuan in the past five days, indicating strong investor interest in the sector [1][2]. Group 1: Market Performance - The aerospace ETF (159227) opened lower and continued to decline, with a trading volume exceeding 100 million yuan, maintaining its position as the leading ETF in its category [1]. - Key holdings such as Huatai Technology, Aerospace Technology, and Guobo Electronics saw gains, while companies like Great Wall Military and Construction Industry faced significant losses [1]. Group 2: Industry Outlook - The importance of air power in modern warfare is increasing, making aerospace equipment a focal point for military development, characterized by high technical barriers and significant value within the military industrial chain [1]. - Guotai Junan Securities predicts that to achieve the centenary goal of military construction by 2027, there will be an acceleration in addressing shortcomings during the 14th Five-Year Plan, emphasizing the need to modernize weaponry and phase out outdated equipment [1]. - The military industry is expected to maintain high prosperity, with related listed companies likely to continue benefiting from this trend [1]. Group 3: ETF Characteristics - The aerospace ETF (159227) closely tracks the Guozheng Aerospace Index, with a high military industry concentration of 97.96%, making it the highest purity military index in the market [2]. - The ETF covers critical segments of the aerospace supply chain, including aerospace equipment, satellite navigation, and new materials, featuring leading companies in the military sector [2].

Core Viewpoint - The military industry sector continues to show strong performance, with military ETFs experiencing significant growth amid rising global military expenditures and geopolitical tensions [1][4]. Group 1: Market Performance - Military ETFs (512660) have surged over 3%, with trading volume exceeding 350 million yuan, indicating strong investor interest [1]. - The military ETF has seen a year-to-date share increase of over 40%, reaching a total size of over 15 billion yuan, making it the largest in its category [1]. Group 2: Geopolitical Context - The NATO summit has led to a commitment from member countries to increase military spending to 5% of GDP, highlighting a global trend of rising defense budgets [1]. - China's military spending as a percentage of GDP remains below the average of major military powers, suggesting significant growth potential in defense expenditure [1]. Group 3: Domestic Developments - Recent announcements from Pakistan regarding the acquisition of advanced Chinese military equipment, such as the J-35 stealth fighter and HQ-19 air defense system, indicate growing international recognition of Chinese military products [1]. - The military sector is expected to benefit from the completion of defense construction tasks and long-term goals set for 2027 and 2035, which will likely drive demand for military equipment [3]. Group 4: Financial Outlook - The military sector is projected to experience a profit bottoming out in Q4 2024, marking the first negative net profit quarter in a decade, but signs of recovery are expected in Q1 2025 with improvements in gross and net profit margins [1][3]. - Total prepayments in the military sector have increased by 9.35% year-on-year, indicating a rebound in downstream orders and potential for upward performance in the future [1]. Group 5: Investment Recommendations - Investors are encouraged to consider military ETFs (512660) as they cover the entire military industry chain and offer good elasticity and defensive attributes, making them a valuable tool for capitalizing on industry opportunities [5].