March Final Battle: The Shanghai Composite Index fluctuates around 3,900 points. Why is there a clear divergence between the yellow and white lines?

Ask AI · How Do Geopolitical Conflicts Affect Capital Preferences in the A-Share Market?

In the last trading day of March, A-shares still showed very strong resilience, at one point rallying to 3,948 points. However, during the last week of the Qingming holiday, cautious sentiment took the upper hand. The Shanghai Composite Index fluctuated around the 3,900-point level. There was a clear divergence between the yellow and white lines, indicating that large-cap stocks were relatively stronger than small- and mid-cap stocks.

This was consistent with the market display: sectors with heavy weights such as household appliances, food and beverage, and banks led the gains. The Huaxia CSI 300 ETF (510330.SH), which holds heavy positions in finance and consumption, surged higher after midday.

Now that this round of conflict has lasted for a month, there are two aspects similar to the Russia-Ukraine conflict: (1) in the early stage of the war, the drawdown was limited, but after about one month, sentiment was released in a concentrated manner, causing the drawdown to widen; (2) small caps fell more than large caps, and the basis widened more than it did for the overall market. At present, investors can first take a defensive stance against the broad market, then wait to observe a rebound in the small-cap index and the stabilization of the basis before switching to small caps.

The Investment Strategy Department of Huaxia Fund Quantity Investment recommends: Considering factors such as the continued persistence of geopolitical conflict, inflation rising, and international liquidity becoming marginally tighter, from the perspective of defensive broad-based allocation, prioritize allocating to the CSI 300 at present.

In an uncertain external environment, capital is more inclined to allocate to large-cap value sectors with strong liquidity, high certainty in earnings, and relatively lower volatility. When volatility reaches an extreme and the market begins to rebound, small- and mid-cap stocks and the ChiNext and STAR Market segment will have more upside elasticity.

The top five industries by weight in the CSI 300 Index are electronics at 14.2%, banks at 11.2%, non-bank financials at 10.2%, power equipment at 8.2%, and non-ferrous metals at 7.1%. They cover the Main Board, ChiNext, and the STAR Market, showing a balanced framework of “finance + consumption + technology manufacturing.”

Huaxia CSI 300 ETF (510330.SH), with management fees as low as 0.15% per year, together with large equity ETF issuers’ liquidity management capabilities, index tracking error control capabilities, and their ability to respond in extreme market conditions, are all important reasons for large capital to choose in very unusual times.

Daily Economic News