Iran-Israel conflict: Chinese defence stocks surge up to 13% as Iran vows to retaliate against Israeli strikes

Chinese defence stocks witnessed heavy buying in trade on Friday, June 13, rallying up to 13% amid speculations that the Iran-Israel conflict could drive demand for Chinese defence equipment as Iran vowed to retaliate against the Israeli air strike on Tehran.

Chinese defence stocks today

The flagship Chinese defence index gained almost 2% in intraday deals, with a majority of its constituents closing in the green. As of the close on Friday, HS China A Aerospace & Defence was up 1.68% to 4,287.21. During the day, the Chinese defence stocks index had topped the 4,300 level to 4,305.97, yet it remained some 13% away from its 52-week high of 4,968.09.

Unmanned Aerial Vehicle (UAV) systems manufacturer AVIC Chengdu UAS was the top index gainer, with its stock settling 11% higher after an over 13% jump in intraday deals. Another drone company, Aerospace CH UAV, was the second biggest gainer, rising 6.5%.

North Industries Red Arrow, North Navigation, AVIC Shenyang Aircraft and Avicopter PLC were among other gainers, with their shares rising between 2-5%.

China and Iran have a 25-year strategic partnership, entered into by the countries in 2021, which encompasses various areas, including economic, political, and military cooperation.

"While so far China has not given Iran any high-end defence technologies, including any fighter jets. But there are speculations that now nobody will supply to Iran, with Russia and China as likely candidates," said Dr Vikas Gupta, CEO and Chief Investment Strategist, OmniScience Capital. However, he cautioned that the current rally seems speculative in nature and is entirely sentiment-driven.

Meanwhile, according to a Wall Street Journal (WSJ) report last week, Iran has ordered thousands of tons of ballistic-missile ingredients from China. Shipments of ammonium perchlorate are expected to reach Iran in the coming months and could fuel hundreds of ballistic missiles, the people familiar with the matter told WSJ.

Iran-Israel conflict

Tensions in the Middle East, although ongoing for years, came to a boiling point today after Israel pounded Iran in a series of air raids on Friday, striking 100 targets including Tehran's nuclear and military sites, and killing the armed forces' chief of staff, the head of Iran's Revolutionary Guards and top nuclear scientists.

Iran's supreme leader Ayatollah Ali Khamenei warned Israel it faced a "bitter and painful" fate over the attacks.

The Israeli military said later that Iran launched 100 drones towards Israel in response and that its air defences were intercepting them outside Israeli territory.

The ripple effects of the conflict were felt across the globe, with financial markets falling like a deck of cards from Wall Street to Dalal Street as investors fled riskier assets for safe havens like gold and silver.

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