Peripheral market crashes, but the A-shares stay strong! What's next?

After overseas markets fell sharply overnight, on March 30, A-shares showed relatively solid performance. After opening lower, they moved upward. A total of 2,868 stocks closed higher in red, with trading volume rising moderately, but they still failed to break through 2 trillion yuan.

Interviewees noted that opening lower and then rising on expanded volume reflects A-shares’ resilience, making them a “sheltered harbor amid the global storm’s eye.” However, overall market risk appetite remains at a low level. There are no clear positive policy or data catalysts yet, and the conditions for a sustained upward trend are not in place. Going forward, it is likely that trading will mainly be characterized by range-bound fluctuations and structural repair. It is recommended to keep the current allocation at 50% to 70%, so you can act when there’s an opportunity and still be able to retreat safely.

Nonferrous metals, communications, and defense lead the charge

In the morning, A-shares opened lower and fell, then rebounded, with performance remaining steady in the afternoon. The index movements diverged: the Shanghai Composite closed up 0.24%, at 3,923.29 points; the ChiNext Market Index closed down 0.68%, at 3,273.36 points. The Shenzhen Component closed down 0.25%. The STAR 50, SSE 50, BS 50, and CSI 300 all closed lower, but their declines did not exceed 1%.

Trading volume did not shrink but increased instead. Today’s trading value rose by 63.9 billion yuan to 1.93 trillion yuan. Leveraged funds kept cooling down. As of March 27, the margin financing and securities lending balances across the Shanghai-Shenzhen-Hong Kong and Beijing markets (沪深京) fell to 261 billion yuan.

In terms of individual stock performance, 2,868 stocks closed higher, with 76 hitting the daily trading limit. 2,464 stocks closed lower, with 16 hitting the daily trading limit. Only 4 stocks had a daily trading value above 10 billion yuan. In the power equipment sector, Sungrow Power Supply fell by nearly 4%. In consumer electronics equipment, Luxshare Precision closed down 3.66%, while Aluminum Corporation of China, Tian Ci Materials, Aerospace Development, and DTM L&I all performed well.

On the board, oil and natural gas rose; communications equipment and precious metals, as well as the superconductivity concept, all rose. But consumer electronics equipment, power equipment, and electric power fell.

Among 31 first-level Shenwan industries, 13 closed down. The utilities sector fell nearly 3%. Household appliances, power equipment, and non-bank financials also declined.

Nonferrous metals, building materials, communications, national defense and military industry, and textiles and apparel led gains, and the pharma and biotech and steel sectors also closed higher.

The nonferrous metals sector is favored by capital, with six related stocks hitting the daily limit, including Liyuan Shares, Minfa Aluminum Industry, Eqi Resource, Changlu Shares, Nanshan Aluminum Industry, and Tianshan Aluminum Industry.

The communications sector also performed well. Hengtong Optic-Electric, Yangtze Optical Fibre and Cable, and Yangtze Communication Technology all hit the daily trading limit. Yunding Shares, Zhongtian Technology, Chengtian Weiye, and Fucai Communications saw strong momentum. In contrast, Inspur Huichuang and Tianfu Communication dipped slightly, while Xinyisheng rose more than 2%.

Twelve pharma and biotech stocks hit the daily trading limit. Haitai New Light “20cm” hit the daily limit. Sanstar Pharmaceutical rose nearly 14%. Dongcheng Pharmaceutical, Afn China, Selili Medical, Menovo Pharma, Lianhuan Pharma, Jiu’an Medical, Shuanglu Biotech, Asia-Pacific Pharmaceuticals, and Tianjin Pharmaceuticals all hit the daily trading limit.

Opening lower and then rising shows resilience

How should we view the fact that, despite the overnight overseas markets’ sharp decline, A-shares opened lower and then rebounded?

Chen Xingwen, Chief Strategist Officer at Kishi Capital, told reporters that the chill from overseas overnight failed to freeze A-shares’ resilience; instead, it created a classic “spring warmth upward” market. Today’s early-session opening lower reflects a knee-jerk reaction of algorithmic trading to overseas sentiment. The subsequent rise on increased volume reflects a rational correction by smart money for the “discount to Chinese assets.” A-shares is becoming a safe harbor amid the global storm’s eye. The subtle resonance between Northbound capital returning and public fund rebalancing suggests that upside momentum is still being accumulated, but it has not slipped into irrational, broad-based euphoria.

“Healthy rotation across sectors indicates that capital is still looking for ‘value for money’ anchors, and the market is not overheated.” Chen Xingwen further said that today’s surge in nonferrous metals is definitely not coincidental. It is not only a hedge tool as the marginal looseness of U.S. dollar credit emerges, but also a repricing after capacity clearance at the upstream of the new energy industry chain. The joint strength of communications and defense aligns with the dual narrative of accelerated digital infrastructure and geopolitical premium. By contrast, the pullback in power equipment is just a tactical reset after crowded high-dividend strategies, not a reversal of an industry trend.

“Because the overall market risk appetite is still relatively low, and there are no obvious positive policy or data catalysts, the index currently does not have the conditions for a sustained upward trend. Going forward, it will most likely be dominated by range-bound fluctuations and structural repairs, making it difficult to sustain a one-way market.” Regarding the sustainability of the rally, Cheng Tianyi, Senior Researcher at Qingdao Anzhi Investment, told reporters directly that today’s A-shares opened lower and then rose, essentially still mainly driven by disruptions from overseas events such as the Iran-U.S. geopolitical conflict. In the short term, market gains and losses clearly track overseas market volatility. After the index experienced a rapid drop earlier, it has entered a phase of support; there is a demand for a technical oversold rebound.

Mainly range-bound fluctuations

Where will A-shares go in the short term? As April approaches, what factors should the market pay attention to?

“In a context where global geopolitical uncertainty still exists and external risk shocks have not been fully eliminated, market risk appetite may be hard to improve quickly, and on the index level, it is likely to remain dominated by range-bound fluctuations.” Liu Youhua, Director of Research at Paipaowang Wealth, told reporters from the International Financial News that in the medium term, domestic macro policies overall still maintain a growth-stabilizing tone, the liquidity environment is relatively loose, and the economy’s fundamentals are also showing a mild repair trend. This provides some support for the A-share market. Therefore, the risk of broad systemic downside is relatively limited. However, with valuations at a relatively high level in the current phase and trading activity showing some decline, market style and industry structure are likely to continue diverging, and structural opportunities will remain the main characteristic.

“The market may continue a structurally oriented, volatile and diverging trading pattern, where mid-level business cycle momentum and micro-level performance matter more.” Mingyu Asset Management said that the duration of the U.S.-Iran conflict exceeds market expectations. Military strikes have expanded to more industrial facilities. The Strait of Hormuz has remained blocked, increasing global energy shocks and supply-chain disruptions. With stagflation expectations warming up, U.S. Treasury yields continue to rise, suppressing market risk appetite. With the U.S. dollar strong, the pace of RMB appreciation is slowing down. Overall, conflict in the Middle East still has potential for escalation. A-shares may continue a volatile and diverging pattern, but the impact magnitude may be smaller than overseas markets.

Chen Jiande, General Manager of Tianlang Fund, told reporters that the conflict in Iran is still ongoing and is affecting global capital market risk appetite as well as oil prices. If oil prices stay at a high level for a long time, it will also affect the U.S. CPI and the Federal Reserve’s rate-cutting process. The Iran conflict’s impact on the market in the medium and short term will likely continue, with significant uncertainty.

Chen Xingwen believes that the core contradiction in April’s market will shift from “policy expectations” to “earnings verification.” The market may climb step by step amid volatility, but volatility will inevitably rise. Three key variables need close monitoring: first, the sustainability of domestic credit pulses—whether social financing data can validate the landing of broad credit support; second, the recalibration of the Fed’s policy path—the hawk-dove swings in the dot-plot will disturb the pricing of global risk assets; third, the “surprise in expectations” in listed companies’ Q1 reports, especially the margin recovery status of midstream manufacturing.

How to position holdings

In a volatile market, how should investors allocate across sectors?

Liu Youhua suggests focusing on cyclical sectors that benefit from resource price increases and supply constraints, as well as high-quality assets with stable cash flow and strong dividend capability. At the same time, watch for opportunities for phased allocation in growth sectors after their adjustments.

Cheng Tianyi believes that, in terms of allocation, the focus can be on the new and old energy directions. Traditional energy benefits from price support brought by geopolitical conflicts and has a stronger defensive attribute. In overall operations, it should mainly allocate on pullbacks, patiently waiting for external risks to ease and market sentiment to stabilize.

For the holding strategy, Chen Xingwen recommends adopting a “strategic long-term holding” configuration strategy with strong conviction: allocate a base position in high-dividend dividends and pro-cycle resources to hedge macro uncertainty; use tactical positions around structural upgrade opportunities, such as AI computing power infrastructure, exporting high-end equipment, and consumption upgrading within the context of downgraded consumption, to capture alpha returns from industry trends.

Mingyu Asset Management reminds investors to watch for a rising-price rally in resource commodities catalyzed by escalating overseas geopolitical conflicts, such as oil, coal, aluminum, and new energy sectors. Also watch for defensive dividend directions, such as banks and utilities, as well as consumption services oriented more toward domestic demand—agriculture and food and beverage. For directions with stronger earnings certainty, such as AI software and hardware, advanced manufacturing, defense and military industries, and innovative drugs, they may also perform after market risk appetite stabilizes.

“Keep the allocation at 50% to 70% now, with an approach that lets you press when opportunities arise and protect yourself when needed.” Chen Jiande recommends. However, the marginal impact of war on A-shares will gradually weaken and become blunt—unless the war’s intensity experiences a major escalation. For long-term investors, A-shares valuations are currently relatively low, and China is impacted relatively less by the Iran conflict. Long-term investors can buy on dips.