Defense ETF Guotai (512660) Pulls Back 2.5%, Dual-Engine Supply Chain Enters Restocking and Capacity Revaluation Period

China Galaxy Securities points out that the global supply chain for two major machinery sectors—aircraft engines and gas turbines—is entering a dual phase of inventory replenishment and capacity reassessment. The industry is experiencing a complex high-growth cycle driven by civil aviation recovery inventory buildup, high-intensity demand from national defense, power shortages in AI data centers, and concentrated maintenance and repair of aircraft engines and gas turbines. This cycle shows clear signs of strong demand and extreme supply constraints.

In civil aviation, aircraft deliveries and production are recovering, and the supply chain is shifting from adjustment to full inventory replenishment. It is expected that by 2026, aircraft engine suppliers will restart inventory buildup. In defense, there is high growth in missile systems and military aircraft spare parts, with strong demand. The gas turbine sector is driven by AI power and grid upgrades, with global orders expected to hit record highs in 2026. On the supply side, key material shortages and maintenance capacity constraints are bottlenecks, with delivery times for materials like nickel-based high-temperature alloys significantly extended. Upstream long-term contract negotiations have seen notable price increases, and supply-demand conflicts in the industry chain are expected to intensify further in the medium term.

The Guotai (512660) military industry ETF tracks the China Securities Military Industry Index (399967), which selects listed companies controlled by the top ten military groups with main businesses related to defense, as well as other representative companies primarily engaged in military industries. The index reflects the overall performance of military-themed listed companies. It covers major military fields such as aerospace, ships, weapons, military electronics, and satellites. The constituent stocks have broad business scopes and relatively balanced styles, making it an important indicator of the military sector’s trend.

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