Group 1 - The core viewpoint is that the defense ETF (512670) has reached a new high, closing at 0.802 yuan, with a year-to-date increase of 1.01% as of July 18, 2025 [1] - The latest scale of the defense ETF has reached 6.71 billion yuan, marking a historical high, driven by multiple favorable catalysts in the military industry [2] - The military sector has shown strong performance this year, with significant events such as a $1 billion order for 350 E20 aircraft from an Emirati buyer and the public debut of the new "Rainbow T1" drone by a Chinese military team [2] Group 2 - The military industry is identified as a resonant direction in the current market, with a focus on the ammunition supply chain and the cyclical logic of order replenishment during the 14th Five-Year Plan [2] - The second half of the year will emphasize "new quality" segments, including new aircraft, new materials, AI integration, data links, and unmanned systems, indicating a shift towards thematic concepts [2] - The defense ETF closely tracks the CSI Defense Index, which includes listed companies under the top ten military groups and those providing weaponry and equipment to the armed forces [2] Group 3 - As of June 30, 2025, the top ten weighted stocks in the CSI Defense Index (399973) include AVIC Shenyang Aircraft (600760), AVIC Engine (600893), and others, with these stocks accounting for 43.29% of the index [3]

Core Viewpoint - The military industry is experiencing a pullback, but recent technological advancements and funding activities indicate potential growth opportunities in the sector [1][2][3]. Group 1: Market Performance - On July 16, the three major indices collectively declined, with the Shanghai Composite Index down 0.03%, the Shenzhen Component Index down 0.22%, and the ChiNext Index down 0.22% [1]. - The aerospace and military sector continued to retreat, with the Guozheng Aerospace Index falling by 0.38%, where 20 stocks rose and 29 fell [1]. - The Aerospace ETF (159227) saw a decline of 0.37%, closing at 1.087 yuan, with a trading volume of 74.75 million yuan and a total scale of 589 million yuan, ranking first [1]. - The Aerospace ETF has recorded a net inflow of funds for 15 consecutive trading days, totaling over 351 million yuan [1]. Group 2: Technological Advancements - On July 16, China's military technology team publicly showcased the first flight of the new "Rainbow T1" drone, which utilizes ground-effect flight principles to target aircraft carrier battle groups [2]. - The first ship of the 076 amphibious assault ship, "Sichuan," completed testing of its electromagnetic catapult system, capable of carrying 27 fixed-wing drones and vertical take-off aircraft, with a command system that can control 200 drones for distributed strikes [2]. Group 3: Institutional Insights - According to Galaxy Securities, the military sector's overall valuation stands at 59.04x, which is in line with the historical average over the past 20 years, indicating room for growth [3]. - Mid-term catalysts are expected to increase in Q3, coinciding with the 80th anniversary of the victory in the Anti-Japanese War and World Anti-Fascist War, alongside positive earnings expectations for some companies in Q2 [3]. - Long-term prospects are bolstered by the India-Pakistan conflict highlighting China's military capabilities, with military equipment demand expected to rise, especially as the centenary of the military approaches in 2027 [3]. Group 4: Related Products - The Aerospace ETF (159227) closely tracks the Guozheng Aerospace Index, focusing on core areas of military aerospace, with a high concentration in the primary military industry at 98.2% [4]. - The ETF's component stocks have a weight of 66.5% in aerospace equipment, significantly surpassing the weights in the Zhongzheng Military and Zhongzheng National Defense indices [4]. - As an efficient tool for investing in leading "fighter jet stocks," this ETF is currently the largest product tracking the Guozheng Aerospace Index [4].