Asia-Pacific stock markets come under pressure again on Tuesday. How will the A-shares perform in the second quarter?

On Tuesday, major Asian market stock indexes once again faced collective downward pressure.

As of the market close on March 31, the Nikkei 225 index fell 1.58% to 51,063.72 points, while the KOSPI index in South Korea plunged even further by 4.26% to 5,052.46 points. The Shanghai Composite Index fell 0.8% to 3,891.86 points; the Hang Seng Index closed up 0.15%.

In terms of trading volume, the total trading value on the Shanghai and Shenzhen markets was 199.25 billion yuan, up 76.6 billion yuan from the 191.59 billion yuan on the previous trading day.

Regarding the market pullback, a securities firm investment advisor said: “On Tuesday, there are two features: first, trading volume has been staying at around 2 trillion yuan recently, with volume shrinking; second, high-dividend varieties are clearly strengthening. Based on the performance that has already been published, some companies’ fourth-quarter data show significant quarter-on-quarter declines, including some consumer companies and even some export-oriented companies. We hope for a rebound in the first quarter. And if prices fall too much, there may also be some repairs in April.”

Another analyst noted that on Tuesday, the three major indexes initially surged together at the open. However, after they repeatedly failed to fill the gap near the upper area, some short-term funds began to realize gains in unison, leading the three major indexes to turn green collectively and continue falling. But from the big-picture trend, the uptrend of the three major indexes at the weekly level has not been broken, and the M10 at the monthly level has also shown strong support.

A research report from Huaxi Securities believes that relatively weak volume and liquidity is the key characteristic of the current market. From last Thursday to this Monday, the citywide trading value has been below 2 trillion yuan for three consecutive days, pointing to a reduction in market divergence—whether investors are standing by or taking a bullish stance, most have adopted a holding attitude. With a relatively small amount of floating shares, if the chips are mainly concentrated in short-term trading funds, the行情 often can be lifted quickly. But recently, the market has been steady without heat, implying that most of the chips may be held by mid- to long-term allocation funds. When volume and liquidity deteriorate to the extreme, a rebound is likely. Even so, if there is a rebound, the pace may be relatively moderate, making it difficult to see a situation of rapid upward movement.

However, Chinese assets in March showed more resilience than the stock markets of Japan and South Korea. Wind data shows that in March, the Nikkei 225 index fell 13.23%, and the KOSPI index in South Korea plunged 21.486%. The Shanghai Composite Index and the Hang Seng Index both saw March declines of about 6%.

Second-quarter trading time is about to begin. Will the resilience in Chinese assets continue?

Wang Han, Chief Economist of Everbright Securities and Co-Director of the Institute of Economic and Financial Research, said that for second-quarter asset allocation, at the strategic level, A-shares should not be overly pessimistic and have clear support. At the tactical level, we need to face the increased volatility in the market and stick to a contrarian approach. Capital markets naturally dislike risk, and A-shares are especially sensitive to this.

An official institutional view published by the Office of the CIO (Chief Investment Officer) of UBS Wealth Management said that the current adjustment in the China market may already be excessive, and investors have the opportunity to add high-quality Chinese AI stocks at lower valuations. China’s internet sector currently has a 12-month forward price-to-earnings ratio of about 13 times, which is close to the level before DeepSeek was released. Current valuations have not fully reflected the returns brought by AI investment and monetization over the past year. UBS Wealth Management expects that MSCI China’s index EPS growth this year will be about 13%, and that the profit growth rate for the technology sector may reach 20% to 25%. Moreover, policy continues to actively support AI development and technological innovation. As market sentiment and fundamentals improve, profits, valuations, and positioning are expected to recover gradually.

In a report, the 广发 strategy team analyzed that under short-term external disturbances, China’s structural advantages and policy support still have resilience. The valuation safety margin provides downside protection, while industrial upgrading and policy dividends provide upside drivers. Against the backdrop of global asset reallocation, China’s safety advantage remains prominent, and the logic for medium- and long-term allocation is clear.

A view from Bosera Fund holds that going forward, it is necessary to focus on whether improvement in demand can transmit from manufacturing to a broader range of services industries, and whether cost pressure will erode corporate earnings. It suggests paying attention to the upcoming first-quarter economic data and listed companies’ earnings reports to verify the actual strength of improvement in fundamentals. On the investment side, in the short term under disturbance from external geopolitical conflicts, a defensive strategy may still be a better choice; in equities, investors may consider a “low-volatility dividends + certain-growth” allocation.

Huatai Securities said that looking ahead, there are variables from geopolitical politics externally and “pre-holiday effects” that suppress trading activity internally, creating pressure on market activity. However, from a cross-month perspective, as A-shares enter a period of intensive earnings releases in April, the market’s pricing anchor is expected to gradually penetrate sentiment shocks and return to verifying fundamentals.

On allocation, Huatai Securities suggests moderately focusing on coal and power in the coal-and-power chain and chemical raw materials that may benefit from potential high oil prices and have the ability to pass through price increases, and using low-end essential consumption as the base holding.

A private fund manager said that the market may continue to be a structural行情 of volatility and differentiation. Macro industry outlook and micro earnings are even more important. There are three directions worth watching: first, a resource-commodity price-increase行情 catalyzed by the warming of overseas geopolitical conflicts, such as oil, coal, new energy, and aluminum; second, dividend directions with defensive attributes, such as banks and utilities, as well as service consumption, agriculture, and food and beverage that lean toward domestic demand; third, directions with strong earnings certainty, such as AI hardware and software, advanced manufacturing, military industry, and innovative drugs—after market risk appetite stabilizes, these may also perform.

（Source: The Paper）