Hang Seng Aerospace & Defence Index Slides After Ceasefire
Chinese defence companies came under intense selling pressure on Tuesday following the announcement of a ceasefire agreement between India and Pakistan, ending several days of active military engagement. The Hang Seng China A Aerospace & Defence Index fell 3%, dragged down by steep losses in major defence firms like AVIC Chengdu Aircraft and Zhuzhou Hongda Electronics, which declined 8.6% and 6.3%, respectively. The broader sentiment soured across defence counters as the perceived war premium dissipated, reflecting reduced expectations for urgent arms procurement by Pakistan in the short term.
Highlights:
Hang Seng China A Aerospace & Defence Index down 3% on May 13.
AVIC Chengdu Aircraft fell 8.6%; Zhuzhou Hongda dropped 6.3%.
Profit-taking triggered by ceasefire between India and Pakistan on May 10.
Ceasefire Ends Four Days of Armed Escalation
The sharp correction in Chinese defence stocks followed the announcement on May 10 that India and Pakistan had agreed to immediately halt all hostilities, including land, sea, and air-based military actions. The truce came after India’s Operation Sindoor, a targeted strike campaign on terror camps in Pakistan and Pakistan-occupied Kashmir, drew retaliatory drone attacks from Pakistan, sparking a rapid escalation. India’s advanced air defence systems successfully intercepted several Pakistani attacks, many of which involved Chinese-made drones and missiles.
China’s direct involvement, though indirect in operational terms, was significant from a supply chain perspective, as Pakistan’s military equipment during the conflict was heavily reliant on Chinese exports, which initially boosted Chinese defence stocks amid expectations of restocking and escalation-driven orders.
Highlights:
India-Pakistan ceasefire ends four-day military escalation involving drone and missile strikes.
Indian air defence systems neutralised China-made Pakistani drones and missiles.
Ceasefire removes immediate prospects of large-scale arms replenishment orders.
Major Chinese Suppliers to Pakistan Hit by Market Reversal
The correction in shares of AVIC Chengdu Aircraft, the manufacturer of J-10C multirole fighter jets used by Pakistan Air Force during aerial engagement with India, was the most prominent. Pakistan’s Foreign Minister Ishaq Dar confirmed in Parliament that these fighter jets were deployed during the recent conflict. The decline in AVIC shares reflects waning expectations for urgent follow-up procurement.
Similarly, Zhuzhou Hongda Electronics Corp, the producer of PL-15 air-to-air missiles, also took a hit, as the prospects for large missile orders dimmed with the ceasefire. Another affiliate, AVIC Aerospace, responsible for manufacturing military helicopters and support aircraft, saw its Hong Kong-listed shares fall over 2%, as investor interest in defence-themed trades cooled off.
Highlights:
AVIC Chengdu: Supplier of J-10C jets used by Pakistan—shares fell 8.6%.
Zhuzhou Hongda: Maker of PL-15 missiles used in conflict—shares down 6.3%.
AVIC Aerospace shares fell over 2% amid reduced demand anticipation.
China Remains Top Weapons Supplier to Pakistan
According to SIPRI data from 2020–2024, China accounted for 81% of Pakistan’s arms imports, cementing its status as Islamabad’s principal military partner. This dominance includes combat aircraft, missile systems, and UAVs. The Netherlands and Turkey followed distantly, with 5.5% and 3.8% of arms exports to Pakistan, respectively. Turkish drones were also widely used by Pakistan during the conflict, although Chinese platforms dominated Pakistan’s aerial response.
With the ceasefire now in effect, defence analysts expect short-term procurement activity to slow, particularly for combat equipment. However, strategic defence relationships are likely to continue, especially in long-term procurement planning, joint development programmes, and training cooperation.
Highlights:
China supplied 81% of Pakistan’s total arms imports during 2020–2024.
Netherlands (5.5%) and Turkey (3.8%) were minor contributors.
Ceasefire likely to delay short-term procurement but not alter long-term defence ties.
