Analysis of the Reasons for Great Wall Military Industry (601606.SH) Being Popular and Its Market Impact

Anhui Great Wall Military Industry Co., Ltd. (601606.SH) is a military enterprise under China South Industries Group Corporation, mainly engaged in the R&D and production of ammunition and weaponry. Its business is divided into equipment manufacturing (63.91%), civilian products (31.07%), and others (5.02%) [0]. Recently, this stock has become popular in the market, with the main driving factors including:

1. Geopolitical tensions
   : The Japanese Prime Minister’s remarks related to Taiwan have raised concerns about the Taiwan Strait situation, stimulating a general rise in the military industry sector, and the National Defense Military Industry ETF opened with a gap-up of over 2% [4];
2. Expectations of controlling shareholder restructuring
   : China South Industries Group has been approved for split restructuring, and the market is full of imagination about the future integration of Great Wall Military Industry [2];
3. Impressive stock price performance
   : It recorded 18 daily limit-ups cumulatively from June to September 2025, and hit the daily limit again on November 17, known as the ‘top bull stock’ in the military industry [1][3];
4. Overall activity of the military industry sector
   : National defense modernization planning and continuous capital inflows have driven the sector’s popularity [4].

However, the company’s fundamentals are poor: it reported a net loss of 363 million yuan in 2024, and still lost 17.767 million yuan in the first three quarters of 2025 [0], showing an obvious divergence between price trend and fundamentals.

1. Significant event-driven market characteristics
   : Stock price fluctuations are highly dependent on geopolitical events and restructuring rumors, rather than performance improvement [0][2];
2. Strong sector linkage effect
   : The popularity of Great Wall Military Industry and capital inflows into the National Defense Military Industry ETF form a positive cycle [4];
3. Short-term speculative sentiment dominates
   : Continuous daily limit-ups reflect short-term speculative behavior in the market, rather than long-term value investment [1][3].

• Fundamental risk
  : Sustained losses may trigger a valuation correction [0];
• Event fade risk
  : Easing geopolitical tensions or unfulfilled restructuring expectations will put pressure on the stock price [2][4];
• Liquidity risk
  : Profit-taking selling pressure may emerge after a short-term surge [1].

• Short-term trading opportunities
  : There may be phased trading opportunities while geopolitical events and sector popularity continue [4];
• Long-term integration potential
  : If the controlling shareholder’s restructuring progresses smoothly, the company may benefit from resource optimization [2].

Great Wall Military Industry has recently become a popular stock, mainly driven by geopolitics, restructuring expectations, and sector popularity, but its fundamentals are weak. Investors need to pay attention to the balance between short-term speculation and long-term value, and monitor event progress and performance improvement signals [0][2][4].