Morning Review: The Shanghai Composite Index fell 0.38%, with coal and other sectors declining, while banking and insurance sectors rose.

On the morning of the 31st, in early trading, the major stock indexes across both markets saw choppy trading with a dip during the session. The ChiNext Index fell by more than 2%, and over 3,600 A-shares were trading in the red.

By the close of midday trading, the Shanghai Composite Index fell 0.38% to 3,908.28 points; the Shenzhen Component Index fell 1.45%; the ChiNext Index fell 2.36%; and the STAR Market Composite Index fell 1.88%. Total turnover across the Shanghai, Shenzhen, and Beijing markets combined was about 1.34 trillion yuan.

On the day’s market performance, sectors such as coal, semiconductors, petroleum, chemicals, power, chemical fiber, and steel moved lower. High-speed rail concepts were active. Bank, insurance, and liquor stocks moved higher, while innovation drug concepts and other themes also saw activity.

CITIC Securities said that the recent market has been affected by a strong liquidity shock, but from the standpoint of fund flows there is no major risk. First, in this round, the main incremental financing and private equity are in a profitable state with a relatively high margin of safety, so there will be no downward negative feedback. Second, in the recent period, ETFs have continued to see net outflows, and major institutional investors have not yet entered the market. Finally, the return of capital from the Middle East will support market upside at the narrative level; this is a high-probability medium- to long-term event that cannot be readily disproven in the short term. Whether people believe it matters more than whether it is true—at least to some extent, narratives can become self-fulfilling. Looking ahead, the room for A-shares to continue making a significant further plunge is limited. The key observation signals for the stage bottom lie in when the stability mechanisms in the capital market begin to take substantive action.