The 3900-point level was lost again! On the last day before the holiday, what happened in the A-shares market?

Ask AI · How does Middle East instability affect post-holiday markets?

Everyday Business News reporter: Zhao Yun Everydaily Business News editor: Peng Shuiping

On April 3, the market fluctuated and adjusted throughout the day. The three major indices opened higher and then fell; the Shanghai Composite Index once again fell below the 3,900-point level. By the close, the Shanghai Composite Index was down 1%, the Shenzhen Component Index was down 0.99%, and the ChiNext Index was down 0.73%.

From a sector perspective, the computing power hardware concept strengthened against the trend, the computing power leasing concept rose in parts, the robotics concept performed actively, and the industrial gases concept saw a volatile rise. On the downside, the power sector weakened, and the coal sector declined.

More than 4,700 stocks across the market fell. The combined trading value of the Shanghai and Shenzhen markets was 1.66 trillion yuan, a decrease of 186.5 billion yuan versus the previous trading day.

Last night, the U.S. stock market saw a major reversal. Bolstered by this, the stock markets in Japan and South Korea also rallied, and the morning session saw them recover as well.

Against this backdrop, A-shares also opened higher in line with the trend. What was somewhat unexpected was that they fell back quickly after the opening.

During the session, the Shanghai Composite Index hit a low of 3,871.3 points, marking a new low for the week.

Looking back, both index performance and individual stock sentiment saw a slight rebound in the afternoon, but the close was still relatively sluggish.

Why is that?

Although it’s a bit of an old topic, the logical explanation still holds: trading value hit a new low within the year (1.66 trillion yuan). Many stocks lack liquidity support, so declines have been smoother than gains.

And this low trading volume has several reasons:

First, Hong Kong stocks have been closed starting today (April 3 to 7), so northbound capital was absent;

Second, it coincided with a mini-holiday. The funds to withdraw for the holiday also largely exited yesterday;

Third, even if they don’t withdraw, those funds sitting in stock accounts still have to factor in potential uncertainties from holiday-related news, so they temporarily choose to stand by and watch.

Especially with the Middle East situation, a key node is coming again after the holiday. According to prior media reports, on March 26, Trump posted on social media stating that the airstrike on Iran’s energy facilities would be postponed by ten days, to 8:00 p.m. U.S. Eastern Time on April 6, which is 8:00 a.m. Beijing time on April 7—precisely again before the A-shares market opens.

According to media reports, in the early hours of April 3 local time, a refinery belonging to Kuwait National Petroleum Company was attacked and caught fire. On the same day, Iran’s Islamic Revolutionary Guard Corps said it had successfully shot down a second U.S. military F-35 fighter jet in Iran’s central airspace.

On April 2, the Secretary-General of the International Maritime Organization, Dominguez, said that restoring navigation through the Strait of Hormuz cannot rely solely on military means; instead, it requires easing tensions and adopting feasible maritime solutions.

Regarding response thinking, a research report from Debang Securities says that overall, (as of Thursday) the core characteristic of A-shares is no longer “growth recovery under easing geopolitical disturbances,” but is more akin to “defensive positioning and profit-repatriation benefits as money returns under rising external uncertainty, with the overall market staying relatively weak and consolidating,” meaning risk appetite has declined.

A research report from CITIC Securities also points out that, taken together, the April A-share market may be dominated by volatility, and the key variable is still the uncertainty of the Middle East situation, which limits the index’s upside potential. It suggests adopting a prudent allocation strategy: while sticking to dividend assets (banks, transportation, utilities) to withstand fluctuations, also plan for energy security such as power equipment and new energy (lithium batteries, photovoltaics).

It further stated that risks to watch include whether the April geopolitical conflicts will unfold in a way beyond expectations, whether marginal tightening in overseas liquidity will trigger a synchronized downside move, and the period of dense earnings report releases—such as large volatility caused when individual companies’ performance falls short of expectations. If the above risks stack up and lead to volatility in A-shares beyond expectations, regulators may stabilize the market by increasing subscriptions to broad-based ETFs, guiding long-term capital to enter, and releasing signals such as cutting the RRR.

Back to today’s trading: among the stocks that rose—fewer than 1,000—technology stocks accounted for a significant share.

Some say it includes “two beams of light” in A-shares.

First, the optical communications industry chain.

On the news front, the optical communications sector in U.S. stocks rose across the board overnight. Applied optoelectronics surged by more than 20%, Lumentum rose by more than 8%, reaching a record high. Coherent, Corning, and others all moved strongly higher.

In addition, on April 2, the General Office of the Ministry of Industry and Information Technology released a notice on launching a special campaign to enable small and medium-sized enterprises’ development with accessible computing power. Providing inclusive computing power supply is a key part of this special action. The Ministry for the first time clearly proposed exploring innovative businesses such as “a computing power bank” and “a computing power supermarket,” supporting small and medium-sized enterprises to store idle computing power resources and enabling flexible use through cross-regional and cross-cycle scheduling.

Second, the optical fiber sector.

On the news front, the optical fiber industry has entered a price-hike wave. UBS’s latest research report, citing data from industry research firm CRU, shows that in March the price of Europe’s G652.D bare optical fiber was 7.94 euros per optical-fiber kilometer, (—equivalent to about 9.1 U.S. dollars ). This represented a 136% increase month-on-month versus January and a 159% increase year-on-year.

CITIC Securities Investment Banking pointed out that overseas telecom network construction, AI data centers, and emerging demands such as drones jointly drove an increase in the volume of optical fiber used. Chinese optical fiber suppliers are showing a “no worries about sales” situation. While transmission of optical fiber price increases to listed companies’ performance is not expected to be obvious in the first quarter, the industry as a whole is in a high-demand cycle, so the optical fiber sector should be recommended on an ongoing basis.

There are also views saying that, overall, the market is still in a weak consolidation structure. When responding, investors should remain cautious, and wait for clearer signals of stabilization before stepping back in, or take a more prudent approach.

Daily Economic News