Core Viewpoint - The military industry sector is experiencing significant activity, with the military ETF (512660) rising over 3.8% and showing strong trading volume, indicating increased investor interest [1]. Funding and Investment Trends - Recent data shows a notable increase in the scale and share of passive funds, with accelerated net inflows into the military ETF (512660), which currently has a scale exceeding 13.7 billion yuan and a share growth of over 36% since the beginning of the year [1]. - The military ETF tracks the CSI Military Industry Index (399967.SZ), which encompasses various sub-sectors such as aviation equipment, military electronics, naval equipment, and aerospace equipment, reflecting the overall performance of military industry companies [2]. Market Dynamics and Future Outlook - The frequency of geopolitical conflicts has increased, making China's advanced weaponry a priority for other nations, which may enhance China's global military trade market share [1]. - The military sector's gross and net profit margins have rebounded in Q1 2025, supported by both international and domestic conditions that are likely to improve annual performance [1]. - As China approaches the end of its 14th Five-Year Plan, there is a pressing need to complete previously delayed national defense construction tasks, with future demand expected to be released in light of the 2027 centenary of the military and the 2035 modernization goals [1]. - China's military expenditure as a percentage of GDP is below 1.5%, lower than the average of major military powers, indicating substantial room for growth in defense spending [1]. - The military sector is expected to see high certainty in domestic demand growth, driven by the "14th Five-Year Plan push," "centenary military goals," and "self-reliant domestic substitution" [1].