AVIC Chengdu to Beijing Navigation Control - Chinese defence stocks volatile amid fading India-Pakistan tensions

Chinese defence stocks witnessed heightened activity on Tuesday, tracking gains in the broader China stock market. Shares of AVIC Chengdu Aircraft, the manufacturer of the J-10 fighter jets, were particularly in focus amid the recent military conflict between India and Pakistan.

The Hang Seng China A Aerospace & Defence Index surged 13% over just six trading sessions — from April 13 to May 12 — coinciding with the onset of the India-Pakistan conflict in early May. The rally was driven by expectations of increased Chinese arms exports to Pakistan as tensions escalated.

However, the rally lost steam following the announcement of a ceasefire agreement between the two nations, which helped ease fears of a prolonged conflict. Subsequently, the index declined nearly 8% over the next 12 sessions until May 28.

In a sign of renewed buying interest, the index of the Chinese defence stocks has since gained over 4% in the last three trading sessions. Hang Seng China A Aerospace & Defence Index is still down 5% from May 12 high.

Several constituent stocks of the index, including Tellhow Sci-Tech, Beijing Navigation Control, Jiangsu Maixinlin Aviation Science and Technology, Tianqin Equipment, and Beijing Hengyu Datacom Aviation Equipment Co, have declined between 5% and 10% over the past month.

AVIC Chengdu Aircraft Share Price Under Pressure

AVIC Chengdu Aircraft, the manufacturer of the J-10 fighter jets used by Pakistan, remained in the spotlight during the peak of the India-Pakistan conflict. However, the bullish momentum in the stock has since faded. AVIC Chengdu share price has plummeted over 20% from their May peak, falling from a high of 95.86 yuan on May 12 to a low of 76.70 yuan in just 15 sessions.

The decline in AVIC Chengdu Aircraft share price was exacerbated after Indian Prime Minister Narendra Modi publicly questioned Pakistan’s claims that Chinese-made fighter jets were responsible for the destruction of the Indian Air Force’s Adampur airbase.

Investor sentiment on Chinese Defence stocks also turned cautious following the successful completion of India’s Operation Sindoor, which showcased India's military capabilities. Additionally, the ceasefire agreement between India and Pakistan has reduced the urgency and potential for immediate defence procurement, further dampening interest in Chinese defence counters.

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