Institutional Market Outlook: A-shares will present the best bottom-fishing opportunity of the year, with the Shanghai and Shenzhen 300 stocks offering a cost-effective advantage in both stocks and bonds.

Why do geopolitical conflicts only have a short-term impact on the A-share market?

Recent repeated local conflicts have triggered global concerns over energy supply and stagflation. The A-share market is also affected by liquidity and risk appetite. However, domestic institutions generally believe that the impact of external conflicts is temporary, and the core variables for the A-shares remain domestic policies and corporate profits. Currently, it may be a good opportunity to buy on dips.

Guangfa Securities believes: In the short term, “there are no experts in geopolitics,” and the situation is unpredictable. In the medium term, the impact may be gradually absorbed, and the technology industry cycle is unlikely to peak easily. Moreover, in 2026, during the U.S. midterm elections, the main issue will be “prices.” The ongoing war situation is unlikely to be sustainable before the midterm elections. The logic of a global non-U.S. asset bull market in 2026 is unlikely to be overturned by geopolitical tensions. Therefore, once short-term uncontrollable geopolitical factors subside, Chinese stocks may present the best bottom-fishing opportunity of the year.

Guotai Haitong Securities states: The long-term direction of the A-shares is always determined by their intrinsic core logic. China still maintains a relatively stable geopolitical landscape, a high energy self-sufficiency rate, a complete industrial system, and stable economic, social, and capital markets. Additionally, 2025 will be the first year that the capital expenditure of listed tech companies turns positive. The gap in computing power between China and the U.S. offers vast potential, and new policy financial tools are expected to stabilize domestic demand, making the growth drivers of the A-share market more diverse.

In terms of investment strategy, Huaxia Fund suggests: “Enduring short-term shocks to gain long-term benefits” is likely a good approach. Historical data shows that asset price volatility caused by geopolitical conflicts usually stabilizes within weeks to months. As emotional shocks recede, the logic driving asset prices will shift back to core macro variables such as economic growth, corporate profits, and interest rate policies. Currently, policies prioritize market stability, respond quickly, and use more precise tools, which may reduce the duration of negative impacts from liquidity crises.

CICC’s Chief Domestic Strategy Analyst Li Qiusuo states: As of March 23, the earnings yield of the CSI 300 index compared to the 10-year government bond yield has a risk premium of 5.5%, placing it at the 42nd percentile since 2010. The dividend yield of the CSI 300 is 2.7%, indicating that the valuation of stocks relative to bonds still has advantages.

Among the many ETFs tracking the CSI 300, Huaxia CSI 300 ETF (510330.SH) has the lowest management fee at just 0.15% per year, and off-exchange fund investors can also consider regularly investing in Huaxia CSI 300 Connect ETF (005658.OF) at dips, with no subscription fee and no redemption fee if held for more than 7 days.

Daily Economic News