As tensions escalate between India and Pakistan, Chinese defence stocks are rising, fuelled by expectations of a boost in exports from Chinese defence manufacturing companies.
Over the past decade, China has become the primary supplier of military hardware to Pakistan, including fighter jets, submarines, frigates, drones, and missile systems.
Between 2020 and 2024, China emerged as the largest seller of weapons to Pakistan, accounting for 81 per cent of its imports, followed by the Netherlands at 5.5 per cent and Turkey at 3.8 per cent. From 2009 to 2014, China represented 51 per cent of Pakistan&rsquo;s total military imports, which rose to 73 per cent between 2015 and 2019.
In the case of China, Pakistan has become its largest defence export market, accounting for 63 per cent of its exports in 2020-24 as compared to 41 per cent in 2009-14.
This heavy military dependence of Pakistan has led to rising investor confidence in Chinese defence stocks. China and Pakistan have long-standing political ties, with diplomatic relations established in 1951. China has also been Pakistan's most important defence partner since the end of the Cold War, according to the US Institute of Peace.
CNBC reported that AVIC, through its subsidiary AVIC Chengdu Aircraft, manufactures the J-10C fighter jets reportedly used by Pakistan in the recent conflict. Another subsidiary, AVIC Aerospace, which produces military aircraft and helicopters, saw its Hong Kong-listed shares rise over 6 per cent. And Shenzhen-listed stocks of AVIC Chengdu Aircraft surged as much as over 16 per cent. It last traded 8.31 per cent higher at 11.40 a.m. local time. On Wednesday, its stocks rose 17.05 per cent, marking the most significant gain since last October.
Shares of China State Shipbuilding Corporation, which builds military and civilian vessels, inched up 0.4 per cent.
<h2 dir="ltr">China-Pakistan defence deals</h2>
Over the years, Pakistan has secured several major defence deals with China, with the estimated total value of these agreements spanning billions of dollars. In 2015, Pakistan signed a deal worth $5 billion for eight Type-041 submarines. Three years later, in 2018, it purchased four Type-054A/P frigates for approximately $1.4 billion.
The following years saw further acquisitions, including the purchase of 36 J-10CE jets in 2022 for an estimated $1.5&ndash;2 billion. Since 2007, the JF-17 Fighter Jet Programme has been a significant investment, with an estimated cost of $2&ndash;3 billion. In 2018, Pakistan also acquired 48 Wing Loong II drones, costing around $200&ndash;300 million.
More recently, in 2021, Pakistan bought HQ-9 surface-to-air missile defence systems and PL-15 air-to-air missiles for about $650&ndash;900 million, and in 2022, it purchased Z-10ME helicopters for an estimated $150&ndash;240 million.
Throughout these transactions, China has supported Pakistan with low-interest financing and flexible payment terms, enabling the country to continue these imports despite its ongoing economic challenges.
Pakistan was the fifth largest buyer of arms in 2020-24, its share jumping to 4.6 per cent from 2.8 per cent in 2015-19.
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Business & Economy: Between 2020 and 2024, China emerged as the largest seller of weapons to Pakistan, accounting for 81 per cent of its imports

As tensions escalate between India and Pakistan, Chinese defence stocks are rising, fuelled by expectations of a boost in exports from Chinese defence manufacturing companies. Over the past decade, China has become the primary supplier of military hardware to Pakistan, including fighter jets, submarines, frigates, drones, and missile systems. Between 2020 and 2024, China emerged as the largest seller of weapons to Pakistan, accounting for 81 per cent of its imports, followed by the Netherlands at 5.5 per cent and Turkey at 3.8 per cent. From 2009 to 2014, China represented 51 per cent of Pakistan’s total military imports, which rose to 73 per cent between 2015 and 2019. In the case of China, Pakistan has become its largest defence export market, accounting for 63 per cent of its exports in 2020-24 as compared to 41 per cent in 2009-14. This heavy military dependence of Pakistan has led to rising investor confidence in Chinese defence stocks. China and Pakistan have long-standing political ties, with diplomatic relations established in 1951. China has also been Pakistan's most important defence partner since the end of the Cold War, according to the US Institute of Peace. CNBC reported that AVIC, through its subsidiary AVIC Chengdu Aircraft, manufactures the J-10C fighter jets reportedly used by Pakistan in the recent conflict. Another subsidiary, AVIC Aerospace, which produces military aircraft and helicopters, saw its Hong Kong-listed shares rise over 6 per cent. And Shenzhen-listed stocks of AVIC Chengdu Aircraft surged as much as over 16 per cent. It last traded 8.31 per cent higher at 11.40 a.m. local time. On Wednesday, its stocks rose 17.05 per cent, marking the most significant gain since last October. Shares of China State Shipbuilding Corporation, which builds military and civilian vessels, inched up 0.4 per cent. China-Pakistan defence deals Over the years, Pakistan has secured several major defence deals with China, with the estimated total value of these agreements spanning billions of dollars. In 2015, Pakistan signed a deal worth $5 billion for eight Type-041 submarines. Three years later, in 2018, it purchased four Type-054A/P frigates for approximately $1.4 billion. The following years saw further acquisitions, including the purchase of 36 J-10CE jets in 2022 for an estimated $1.5–2 billion. Since 2007, the JF-17 Fighter Jet Programme has been a significant investment, with an estimated cost of $2–3 billion. In 2018, Pakistan also acquired 48 Wing Loong II drones, costing around $200–300 million. More recently, in 2021, Pakistan bought HQ-9 surface-to-air missile defence systems and PL-15 air-to-air missiles for about $650–900 million, and in 2022, it purchased Z-10ME helicopters for an estimated $150–240 million. Throughout these transactions, China has supported Pakistan with low-interest financing and flexible payment terms, enabling the country to continue these imports despite its ongoing economic challenges. Pakistan was the fifth largest buyer of arms in 2020-24, its share jumping to 4.6 per cent from 2.8 per cent in 2015-19.

Rising tensions between India and Pakistan propel surge in Chinese defence stocks

Global investors are feeling jittery about investing in China. In March, over $11 billion has gone out the door. Why are foreign investors dumping Chinese stocks? Palki Sharma tells you.

Gravitas: Why global investors are dumping Chinese stocks

Asian shares eked out small gains on Tuesday as expectations that Beijing will maintain support for its economy ahead of a key congress supported Chinese stocks and metals prices, but worries about North Korea kept many investors on edge.

European shares were expected rise slightly after a slide on Monday. Spread betters see Germany&#39;s DAX and France&#39;s CAC gaining 0.3 percent and Britain&#39;s FTSE 0.1 percent.

But Wall Street looked set to open slightly softer after a long holiday weekend during which Pyongyang triggered its most powerful nuclear test yet. S&amp;P500 mini futures, which had slid on Monday, last stood at 2,469, 0.2 percent below Friday&#39;s close.

MSCI&#39;s index of Asia-Pacific shares outside Japan was up 0.2 percent thanks to gains in Chinese shares, though many markets were in the red.

Japan&#39;s Nikkei fell 0.6 percent on fears that more provocation from North Korea is possible. Media said the North appeared to be preparing for further ballistic missile tests.

The White House said on Monday that &quot;all options to address the North Korean threat are on the table&quot; while US&nbsp;Ambassador to the United Nations Nikki Haley urged the 15-member UN&nbsp;Security Council to impose the &quot;strongest possible&quot; sanctions to deter Pyongyang.

&quot;It&#39;s not clear whether diplomacy can solve this problem given it has failed for the last 25 years,&quot; said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities.

&quot;But the US&nbsp;doesn&#39;t seem to be ready for a military action soon, either. So we are likely to see continued stalemate, which will keep a tab on share prices.&quot;

Fears about North Korea kept safe-haven assets in demand, with gold rising 0.1 percent to $1,336 per ounce, after having hit a 11-month high of $1,339.8 on Monday.

In the currency market, the yen, which usually gains on risk aversion due to Japan&#39;s net creditor nation status, gained 0.4 percent to 109.32 yen to the dollar, near Monday&#39;s high of 109.22 yen.

The euro slightly extended its gains to trade at $1.1905.

But it kept some distance from a 2-1/2-year high of $1.2070 hit last week on rising expectations that a stronger euro could slow the European Central Bank&#39;s (ECB) plans to rein in its bond-buying stimulus scheme.

The Chinese yuan hit a near 16-month high of 6.515 per dollar. It has gained 2.0 percent in less than two weeks, a sizable move for the pair, in response to dollar weakness and a series of stronger midpoints set by the central bank.

The Shanghai composite index of mainland Chinese shares hit its highest levels since January 2016, due to solid economic and earnings growth in China in recent months and expectations that Beijing will not tolerate any disruptions ahead of a key Communist Party Congress in mid-October.

Such expectations also helped to lift copper to a near three-year of $6,944.5 per tonne. It last stood at $6,933, up 0.2 percent on the day.

The prices of steel and iron ore have rallied in recent weeks.

But some analysts say profit-taking in base metals could start soon.

&quot;Now that Beijing fixed its schedule on the national congress, it may no longer accelerate infrastructure spending,&quot; said Tatsufumi Okoshi, senior economist at Nomura Securities.

&quot;We should be mindful of the possibility that iron ores, steel and other non-ferrous metals will peak out soon.&quot;

US&nbsp;crude oil prices edged higher while U.S. gasoline prices slumped to pre-Hurricane Harvey levels, as oil refineries and pipelines in the US&nbsp;Gulf Coast slowly resumed activity, easing supply concerns.

US&nbsp;West Texas Intermediate (WTI) crude futures ticked up 0.2 percent to trade at $47.38 per barrel.

The return of US&nbsp;refineries ended a spike in gasoline prices as initial fears of a serious supply crunch faded.

US&nbsp;gasoline futures dropped 4.1 percent from their last close, to $1.67 per gallon, down from $2.17 touched on Aug. 31 and back to levels last seen before Harvey hit the US&nbsp;Gulf coast and its large refining industry.

Elsewhere, bitcoin dropped further from Saturday&#39;s all-time high of $4,979.9 to trade at $4,012 after China on Monday banned the practice of raising funds through launches of token-based digital currencies, or so-called initial coin offerings (ICO).

European shares were expected rise slightly after a slide on Monday. Spread betters see Germany's DAX and France's CAC gaining 0.3 percent and Britain's FTSE 0.1 percent.

Asian shares eked out small gains on Tuesday as expectations that Beijing will maintain support for its economy ahead of a key congress supported Chinese stocks and metals prices, but worries about North Korea kept many investors on edge. European shares were expected rise slightly after a slide on Monday. Spread betters see Germany's DAX and France's CAC gaining 0.3 percent and Britain's FTSE 0.1 percent. But Wall Street looked set to open slightly softer after a long holiday weekend during which Pyongyang triggered its most powerful nuclear test yet. S&P500 mini futures, which had slid on Monday, last stood at 2,469, 0.2 percent below Friday's close. MSCI's index of Asia-Pacific shares outside Japan was up 0.2 percent thanks to gains in Chinese shares, though many markets were in the red. Japan's Nikkei fell 0.6 percent on fears that more provocation from North Korea is possible. Media said the North appeared to be preparing for further ballistic missile tests. The White House said on Monday that "all options to address the North Korean threat are on the table" while US Ambassador to the United Nations Nikki Haley urged the 15-member UN Security Council to impose the "strongest possible" sanctions to deter Pyongyang. "It's not clear whether diplomacy can solve this problem given it has failed for the last 25 years," said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities. "But the US doesn't seem to be ready for a military action soon, either. So we are likely to see continued stalemate, which will keep a tab on share prices." Fears about North Korea kept safe-haven assets in demand, with gold rising 0.1 percent to $1,336 per ounce, after having hit a 11-month high of $1,339.8 on Monday. In the currency market, the yen, which usually gains on risk aversion due to Japan's net creditor nation status, gained 0.4 percent to 109.32 yen to the dollar, near Monday's high of 109.22 yen. The euro slightly extended its gains to trade at $1.1905. But it kept some distance from a 2-1/2-year high of $1.2070 hit last week on rising expectations that a stronger euro could slow the European Central Bank's (ECB) plans to rein in its bond-buying stimulus scheme. The Chinese yuan hit a near 16-month high of 6.515 per dollar. It has gained 2.0 percent in less than two weeks, a sizable move for the pair, in response to dollar weakness and a series of stronger midpoints set by the central bank. The Shanghai composite index of mainland Chinese shares hit its highest levels since January 2016, due to solid economic and earnings growth in China in recent months and expectations that Beijing will not tolerate any disruptions ahead of a key Communist Party Congress in mid-October. Such expectations also helped to lift copper to a near three-year of $6,944.5 per tonne. It last stood at $6,933, up 0.2 percent on the day. The prices of steel and iron ore have rallied in recent weeks. But some analysts say profit-taking in base metals could start soon. "Now that Beijing fixed its schedule on the national congress, it may no longer accelerate infrastructure spending," said Tatsufumi Okoshi, senior economist at Nomura Securities. "We should be mindful of the possibility that iron ores, steel and other non-ferrous metals will peak out soon." US crude oil prices edged higher while U.S. gasoline prices slumped to pre-Hurricane Harvey levels, as oil refineries and pipelines in the US Gulf Coast slowly resumed activity, easing supply concerns. US West Texas Intermediate (WTI) crude futures ticked up 0.2 percent to trade at $47.38 per barrel. The return of US refineries ended a spike in gasoline prices as initial fears of a serious supply crunch faded. US gasoline futures dropped 4.1 percent from their last close, to $1.67 per gallon, down from $2.17 touched on Aug. 31 and back to levels last seen before Harvey hit the US Gulf coast and its large refining industry. Elsewhere, bitcoin dropped further from Saturday's all-time high of $4,979.9 to trade at $4,012 after China on Monday banned the practice of raising funds through launches of token-based digital currencies, or so-called initial coin offerings (ICO).

Global stocks on defensive after selloff on North Korea fears

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Rising tensions between India and Pakistan propel surge in Chinese defence stocks

Gravitas: Why global investors are dumping Chinese stocks

Global stocks on defensive after selloff on North Korea fears