A-share ground military equipment sector surges 7.86% in a single day - How far can the rebound go?

CNR Beijing, March 24 — (Reporter Zou Xuchen) On March 24, the A-share market rebounded. According to Tonghuashun data, based on Shenwan’s secondary industry classification, the ground military equipment sector led the entire market with a single-day increase of 7.86%.

However, it is noteworthy that the sector’s recent 5-day price change remains at -4.7%, showing a divergence pattern of “violent rebound in a single day, short-term overall correction,” which highlights the intense competition for capital within the sector and reflects the current market characteristics of valuation recovery, event catalysts, and short-term volatility intertwined.

Previous Oversold Conditions and Event-Driven Rebound

From the market performance, the ground military equipment sector was strong throughout the day, quickly rising after opening, with continuous gains during the session, maintaining high-level oscillations at the close, and ultimately closing with a large bullish candlestick, with many stocks in the sector experiencing gains.

Data shows that among the 12 constituent stocks in the sector, 11 stocks gained more than 5%; only ST Emergency (300527.SZ) had a slightly lower increase at 4.95%. Notably, Great Wall Military Industry (601606.SH), Optical Electronics (600184.SH), and Galaxy Electronics (002519.SZ) hit the daily limit, while Northern Long Dragon surged 16.44%, and Tianqin Equipment also rose 12.12%.

Constituent stock price limit-up/down situation. Image source: Eastmoney

However, Tonghuashun data indicates that among the 12 constituent stocks, only one stock recorded a positive price change over the past 5 days; overall, the sector’s cumulative decline over the past 5 days is still 4.7%.

Lu Suiqi, an emeritus associate professor at Peking University’s School of Economics, analyzed that the recent strong rise in the ground military equipment sector is driven by two main reasons: first, the sector had experienced a significant decline earlier, accumulating strong technical rebound demand, which then triggered a concentrated short-term upward momentum; second, the ongoing conflict between the US, Israel, and Iran has continued to ferment, and the tense geopolitical situation has directly boosted the military industry sector.

Tian Lihui, a professor of finance at Nankai University, told China National Radio’s finance reporter that today’s single-day surge in the ground military equipment sector is a typical event-driven rebound. The immediate trigger may be the escalation of geopolitical conflicts, but the deeper trading logic lies in technical recovery after prior overselling: the 4.7% decline over the past 5 days has fully cleared the chip structure, allowing a small amount of capital to leverage the sector’s elasticity. Additionally, the military industry sector has always been highly sensitive to policy signals, and related market narratives also provide short-term capital with clear themes.

Xinhua News Agency reported early on March 24 that the U.S. Marine Expeditionary Unit (MEU) and its amphibious assault ships will arrive in the Middle East on the 27th. The report pointed out that this date coincides with the final deadline set by U.S. President Trump for “opening” the Strait of Hormuz to Iran. Citing two U.S. officials, the report said, “The USS New Orleans amphibious dock landing ship, the USS Lorrain amphibious assault ship, and over 2,000 members of the 31st Marine Expeditionary Unit will enter the U.S. Central Command responsible for Middle East operations on the 27th, but it will take a few more days to reach the Strait of Hormuz.”

Follow-up Focus on Orders and Capital Continuity

Tian Lihui believes that the sharp contrast between the 5-day decline and the single-day surge reveals the sector’s structural characteristics: high Beta, low institutional holdings, and strong thematic attributes. He explained that the core reason for the earlier adjustment was that the military industry’s performance did not meet expectations—during the annual report disclosure season, some companies saw slowing order growth and margin pressure, leading to concentrated institutional de-stocking and market panic; this rebound, however, highlights the typical features of stockpile battles among capital, with the rise lacking fundamental support and its sustainability questionable. This “sharp fall and rise” pattern essentially reflects liquidity-driven chip battles in a relatively thin environment, not a sign of a sector trend reversal.

Regarding the future trend of the sector, Tian Lihui predicts: in the short term, if geopolitical events do not translate into actual orders or positive earnings announcements, the current valuation premium will quickly decline, and funds chasing the rise today may become the selling pressure tomorrow. In the medium term, as a traditional land army equipment track, the growth logic of the ground military equipment sector is weaker compared to segments like aerospace and aviation, especially with the industry’s rapid rise in new domains such as unmanned systems and electronic warfare. The valuation ceiling is relatively limited. If geopolitical conflicts ease or military procurement schedules slow down, the sector is likely to revert to a volatile downward correction. He advises investors to adopt a tactical approach to sector fluctuations and not mistake daily market movements for a turning point.

Renowned tax and finance expert Liu Zhigeng told China National Radio that the ground military equipment sector may continue to fluctuate in the short term or face a correction, with long-term performance depending on industry fundamentals and policy implementation.

He pointed out that if subsequent military procurement tenders are implemented, state-owned enterprise reforms deepen, and asset injections are announced, coupled with better-than-expected corporate earnings during the reporting season, the sector could enter a phase of upward trend. However, the military industry has historically been “emotion-driven with weak sustainability,” easily affected by large capital rebalancing. Without continuous positive catalysts or a market-wide risk appetite recovery, this rally may not sustain, and the sector could revert to consolidation or even decline. Liu Zhigeng recommends investors pay attention to future order announcements and capital flow sustainability.

Shen Meng, director of Sang Sang Capital, also stated that besides orders and capital, investors should closely monitor the ongoing developments in the Middle East.