Middle East geopolitical risks escalate, U.S. stocks decline for 5 consecutive weeks! What will happen to the A-shares tomorrow?

（Source: ETF Wind Indicator）

In the just-passed trading week (March 23 to 27), the A-share market experienced yet another round of ups and downs.

The good news is that, although the market as a whole is still down cumulatively this week (such as the Shanghai Composite Index, Wind All A, and other indicators), the weekly K-line printed a long lower shadow, suggesting that the “most dangerous time” has very likely already passed, and sentiment has also seen a better repair.

Wind All A weekly K-line

Looking at individual stocks, this week 2,220 stocks closed higher, representing the “best” performance since March.

On the sector front, directions such as the lithium battery industrial chain also showed a relatively sustained “money-making” effect.

The bad news is that what appeared to ease during trading on Friday—developments in the Middle East that had once supported strength in the Asia-Pacific market—became complicated again after the market close, even leading to another drop in U.S. stocks.

As of the close on Friday, the S&P 500 fell 1.67%, the Nasdaq Composite fell 2.15%, and the Dow Jones Industrial Average fell 1.73%. By this point, all three major U.S. stock indexes have recorded five consecutive weekly declines. Among them, the Nasdaq fell 3.23% cumulatively this week, the S&P 500 dropped 2.12%, and the Dow fell 0.90%.

And as of the time of writing, based on weekend news flow, there are still no clear signs that the situation is easing (we will sort through details below).

This in fact presents investors with a difficult question:

It is known that the market’s sharp drop on Monday of this week (also the third straight day of declines) was subsequently repaired over the following four days—confirming that “there is a bottom below.”

Shanghai Composite Index weekly K-line

So next week, will the market again be influenced by the weekend situation and stage another “dip-buying and rebound” move?

If so, will Monday’s script be “a dip,” or will the repair be completed directly intraday?

If not, how long do you think the seesaw effect of “oil rising and stocks falling” will continue?

Admittedly, this is a short-term trading tug-of-war point, but a “don’t pre-judge, just respond” strategy is actually suitable for more people right now.

Put more plainly: if the market is still going to adjust, we can also believe in the resilience of China’s A-shares, and take action at the location most likely to receive support (that is, the place most likely to rebound), rather than impulsively chasing highs or selling emotionally.

CITIC Securities believes that, since March to date, A-shares have oscillated and fallen, going through a process of “adjustment—rebound—second decline.” Index performance has been dominated by overseas factors; the escalation of the Iran-U.S. conflict and the stagflation trade have been the main trading storyline throughout the month. Within the technology category, upstream segments show outstanding resilience, and within cyclical categories, the energy-chain has been strengthening. Looking ahead, the market may still face volatility in the short term, but there is no risk of a major systemic downside; structurally, opportunities may revolve around “growth themes” with strong independence.

Therefore, on allocation, it is suggested to focus on the defensive attributes of dividend/quality assets, and position in repair candidates after the marginal convergence of geopolitical risk.

A research report from Guosen Securities argues that this bull market began on September 24, 2024. The macro backdrop is comparable to the bull market that began on May 19, 1999—both are cases where macro policy efforts kick in to address deflation. A transition from bull to bear often occurs when the macro environment worsens and stock market sentiment is overly exuberant; neither of these two conditions is met currently.

Compared with historical bull-market highs, at present neither market time-space nor investor sentiment has reached an extreme.

From the perspective of how long the rally lasts, as mentioned earlier, the three rounds of typical A-share bull markets have all lasted more than 24 months. The Wind All A average advance is 151%. As of March 23, however, this round of行情 has only been underway for 18 months so far, and the Wind All A range gain is 58%, leaving substantial room versus historical bull-market time-space. From the perspective of market sentiment, as of 3/23, the PE of all A-shares is 21.7x and the risk premium rate is 2.8%, which still leaves a gap versus bull-market peaks in years like 07, 10, 15, and 21. This indicates that market sentiment has also not yet reached an extreme.

So how should we interpret this round of pullback?

It indicates that, according to the Elliott Wave Theory, a bull market can be divided into 5 waves: waves 1, 3, and 5 are advance waves, while waves 2 and 4 are pullback waves. Therefore, the sharp adjustments appearing in the middle-to-late part of a bull market correspond to the wave 4 adjustment. From a technical analysis angle, the September 24, 2024 “9·24” Shanghai Composite Index at 2689 points is the starting point of wave 1 of this round’s bull market. After that, last year’s April 7 Shanghai Composite Index at 3040 points corresponded to the starting point of the upmove in wave 3. And currently the market is very likely in the wave 4 adjustment stage. If we compare this round’s bull market that originated from “924” in 2024 with the 1999 bull market that originated from “519,” the adjustment since January 2026 may be similar to the adjustment period from August 2000 to February 2001.

“If the low point brought about by the current geopolitical conflict belt is the market’s bottoming area for the full year, then in terms of amplitude, the market may have new highs ahead.”

Next, let’s look at the weekend news flow.

（1）Middle East situation

At around the evening of March 27, Beijing time, news that “the U.S. and Israel carried out airstrikes on an Iranian steel plant and its supporting power plants” can be said to have directly triggered the drop in U.S. stocks. Earlier, news that “Iran said it warned off 3 vessels attempting to pass through the Strait of Hormuz” had already begun to raise market concerns.

Here we combine reports from various media and also roughly sort the subsequent timeline (as of the morning of March 29, Beijing time).

（2）Other news

To respond to volatility in the energy market, Russia plans to implement a temporary gasoline export ban starting April 1

In the first three months of this year, the total value of China’s innovative drug out-licensing transactions exceeded $60 billion, approaching about half of the full-year amount in 2025

China’s nuclear medicine sector has achieved a key breakthrough

Relying on the large-scale scientific facility China Spallation Neutron Source, recently the Institute of High Energy Physics of the Chinese Academy of Sciences first achieved mass production of medical-grade alpha isotopes at the Curie scale, which will accelerate China’s indigenous alpha nuclear medicine candidates from the laboratory to clinical applications.

The term “Token” reached its highest search volume in a single day of 77,000 times, which is 1,850% higher than the average daily search volume last year.

Company announcements

Great Wall Motor: plans to use no more than RMB 43.5 billion of its own funds to purchase low- to medium-risk wealth management products

BYD: plans to use no more than RMB 60 billion of its own idle funds to conduct entrusted wealth management

TCL Technology: in 2026, plans to use no more than RMB 35.5 billion of its own funds to conduct entrusted wealth management

As for next week’s news flow, two major items are mainly worth focusing on.

March 31, Tuesday

PMI data will be released

According to data released earlier by the National Bureau of Statistics, in February, the manufacturing PMI was 49.0%, down 0.3 percentage points from January; the non-manufacturing business activity index was 49.5%, up 0.1 percentage points from January; and the composite PMI output index was 49.5%, down 0.3 percentage points from January.

Some analysts said that in February, the impact of seasonal factors on manufacturing is still showing, and manufacturing operations have slowed somewhat, but this slowdown is short-term, while positive changes are being accumulated. In March, as the impact of the Spring Festival holiday has basically faded, temperatures in different regions will gradually rise, factories and construction sites will fully resume work, and the economy and society will return to normal operating tracks.

April 1, Wednesday

According to announcements from the Ministry of Finance and the State Taxation Administration, starting from this day, the VAT export tax refund for products such as photovoltaic power generation will be canceled

Analysts believe that this cancellation of tax refunds was already expected by the industry. By canceling export tax refunds, short-term pressure will be imposed on export companies, which will accelerate the internal motivation for enterprises to activate global capacity layout, thereby pushing China’s photovoltaic industry to gradually move away from the competitive pattern of “low-price price wars” and toward a high-quality development track of “technology-based price negotiation.” Going forward, the penetration speed of advanced technology routes such as TOPCon 3.0, BC, and perovskites will accelerate, and the industry will enter a new development stage driven by technology.

Investment involves risk; independent judgment is important

This article is for reference only and does not constitute a basis for buying or selling. Risks in entering the market are borne by investors themselves.

Cover image source: screenshot from a market data software

Reporter: Xiao Ruidong | Editor: Zhao Yun | 每经编辑 赵云

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