Sudden development at midday! A-shares fall below 3,900 points, international oil prices extend gains

Ask AI · How the Iran-U.S. negotiation deadlock is affecting global oil prices and stock markets

Although the United States wants to negotiate with Iran, the two sides’ demands differ greatly, and according to reports, Iran is the party that initiated the ceasefire. Iran has reportedly rejected the “15 ceasefire conditions” proposed by the United States and set out five conditions for ending the war. This means that even if negotiation winds shift, they will likely keep tugging back and forth, and there remains a great deal of uncertainty. Today, intraday oil prices surged again; after a slight rebound in the early session, China’s A-shares weakened in a one-way move, and the Shanghai Composite Index fell below 3,900 points.

How the stock market will move depends on positioning and expectations. If the current stock market level is low and everyone’s positioning is also low, then as long as there is an expectation of a turnaround, people will be willing to take the bet. But in reality, right now both institutions and retail investors have high positions. The stock market can keep rising without anyone worrying about missing the opportunity. Instead, if the stock market keeps falling, the drawdown will be larger. Especially after the recent accelerated selloff, the median fund position has turned negative, and many fund investors are redeeming. If you can’t control drawdowns here, it can trigger even larger redemptions.

So what we see these past two days is that the rebound has not come with much volume. Today is even down to below 2 trillion yuan in volume, which indicates that large capital is largely on the sidelines, waiting patiently for the situation to become clear. Only then might we see a rally with heavy volume.

Most investors still believe the Iran issue will be only a short-term shock to global stock markets and will not lead to stagflation or even a recession scenario. So even if the market pulls back in the short term, since both institutions and retail investors generally have positions that are already too heavy, and they are also heavily invested in AI technology stocks.

Over these two days, we’ve also seen some bearish views. For example, Fu Peng believes that global financial market liquidity will tighten going forward, and AI assets will be subject to large-scale valuation cuts.

Lin Rongxiong, chief analyst at Guotou Securities, also thinks the market’s macro environment could be completely reversed. He draws a comparison with the period after past A-share internal positioning imbalances and major changes in the global macro environment occurred at the same time. The key question after this round of decline is whether it resembles early 2021 or early 2022. If it’s 2021, it means the broad-market index still has a chance to set new highs in the second half of the year. If it’s 2022, it means that the broad-market index’s high level for the year was already clearly established in the first quarter, and—except for a very small number of industries like coal—most sectors have clearly fallen. In essence, this is about reducing positioning, and what follows is pricing for stagflation or even a recession.

Hearing both sides can prevent mistakes, but blindly believing one side can be dangerous. Especially with global stock markets already at high levels and the market environment particularly complex right now, even if the bearish view may not be correct, it doesn’t stop you from using it as a scenario assumption to avoid being overly overconfident and ignoring risks.

Now let’s look at today’s major breaking news:

• The Iran-U.S. negotiations are murky. Iran has clearly rejected the U.S. ceasefire proposal, but the White House spokesperson said the Iran-U.S. negotiations are still ongoing and are effective. House Speaker Johnson said Iran’s war is “nearing the end and its objectives have been achieved.” The U.S. forces’ troop buildup in the Middle East is a warning to Iran and there will be no ground operations. An Iranian military source said that if the other side tries to carry out ground actions on Iranian islands or other territories, Iran may open other fronts. Iran has made sufficient preparations to further escalate the situation. Two senior U.S. government officials said the U.S. is trying to arrange a meeting this weekend in Pakistan to discuss a “withdrawal plan” for ending the U.S.’s war with Iran.

According to reports, Iran rejected the “15 ceasefire conditions” proposed by the United States and set out five conditions for ending the war, insisting that the war can only end according to Iran’s own timetable.

According to reports, Iran’s Islamic Consultative Assembly Speaker Kalibaf and Foreign Minister Aragchi have temporarily been removed from the U.S. and Israel “clearing lists.”

• According to reports, in the early hours of the 26th local time, the chairman of the civil committee of Iran’s Islamic Parliament said, “We are seeking a bill that can both legally safeguard Iran’s sovereignty, dominion, and regulatory rights over the Strait of Hormuz, and also generate revenue for the state by collecting transit fees.”

• Google releases TurboQuant, a compression algorithm specifically for AI inference, which can compress KV cache from 32-bit to 3-bit, reducing memory usage by 6 times; inference efficiency is significantly improved, with single-GPU inference speed up to 8 times.

According to Jibang data, today some DDR4 and DDR5 memory chips continue to fall. Among them, DDR4 16Gb (2Gx8) 4800/5600 fell 0.91%, with an average price of $75.727.

Last night, U.S. stocks related to storage slid. Micron and SanDisk fell by more than 3%. Today, China’s A-share storage sector also dropped sharply: Zhaoyi Innovation and Bovu Storage both fell by more than 5%. Google’s TurboQuant compression algorithm for AI inference is having more of a sentiment impact on the storage sector. The storage sector’s adjustment is mainly because it has risen too much.

• Regarding U.S. President Trump saying he will visit China in mid-May, at a regular press briefing on March 26, Ministry of Foreign Affairs spokesperson Lin Jian said that leader-to-leader diplomacy plays an irreplaceable strategic guiding role in China-U.S. relations, and the two sides have been in communication regarding President Trump’s visit to China.

• Today’s lithium battery sector performed strongly. Rongjie Co., Ltd. hit the daily limit. Haike Xinyuan and Tianji Shares also briefly hit the daily limit during the trading session.

On the one hand, institutions are optimistic about the increase in the global penetration rate of new energy under high oil prices. On the other hand, supported by strong fundamental performance in lithium batteries, the momentum has kept going. For April and May, expectations point to demand and prices accelerating. In both April and May, lithium battery production schedules increased month-on-month. The April increase is something that has not been seen in the past four years. Even with the March rush-to-order expectations, it shows that lithium battery demand is extremely strong.

Finally, a quick look at the market as of the close: the Shanghai Composite Index fell 1.09%; the ChiNext Index fell 1.34%. In Hong Kong stocks, the Hang Seng Index fell 1.89%, and the Hang Seng Tech Index fell 3.28%.

By industry, only three defensive sectors—coal, petroleum and petrochemicals, and banks—were up, while sectors such as computer, non-bank financials, communications, building decoration, and environmental protection led the declines.

Risk notice:

There are risks in the stock market; invest cautiously. This article does not constitute investment advice. Readers should think independently

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