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Terrorism dominated headlines in China today.

Islamic State said it had killed two hostages, one Norwegian and one Chinese. In response, China's foreign ministry said in a statement that China "strongly condemns this inhuman brutality. The criminals will be brought to justice." It will be interesting to see how China acts.

Can the world be friendly with Russia again in its rekindled cause against terrorism? China certainly has been Russia's friend. Russia just confirmed that China would buy 24 of its Sukhoi-35 fighter jets, the most advanced military aircraft from Russia, for more than $2 billion. It is the first time Russia sells this aircraft to foreigners.

With all the South China Sea disputes, air defense has been a big theme in China's stock market this year. AviChina (2357.Hong Kong), the only Hong Kong-listed subsidiary of the state-owned aviation conglomerate Aviation Industry Corp. of China (AVIC), gained 35% this year. AVIC expanded into fighter jet manufacturing in August.