The A-shares continued to decline in the afternoon, with the downward momentum widening, and the Shanghai Composite Index fell below 4,000 points: combined trading volume of the two markets approached 2.3 trillion yuan.

Ask AI · How Does the Escalation of the Middle East Situation Affect Short-Term Sentiment in China’s A-Shares?

China’s three major A-share indexes had mixed performances at the open on March 20. In the morning, the indexes diverged; the Shanghai Composite Index briefly fell below 4,000 points. A sharp rally in the morning failed to carry over into the afternoon—instead, a one-way downward trend emerged.

From the trading screen, concept stocks such as AI compute leasing, financial technology, cybersecurity, AI applications, commercial aerospace, robots, and memory chips all fell. By contrast, sectors such as photovoltaics and lithium batteries, as well as the CPO theme, strengthened against the trend.

By the close, the Shanghai Composite Index fell 1.24% to 3,957.05 points; the STAR 50 Index fell 1.55% to 1,318.31 points; the Shenzhen Component Index fell 0.25% to 13,866.2 points; and the ChiNext Index rose 1.3% to 3,352.1 points.

Wind statistics show that among the two markets and the Beijing Stock Exchange, 661 stocks rose, 4,784 stocks fell, and 43 stocks were flat.

Total turnover across the Shanghai and Shenzhen markets was 2,286.8 billion yuan, up 175.8 billion yuan from 2,111.0 billion yuan on the previous trading day. Of this, Shanghai’s turnover was 964.9 billion yuan, up 29.6 billion yuan from 935.3 billion yuan the prior day; Shenzhen’s turnover was 1,321.9 billion yuan.

According to Great Wisdom VIP, among the two markets and the Beijing Stock Exchange, 51 stocks had gains of more than 9%, while 44 stocks had declines of more than 9%.

Power equipment surged sharply at one point, while the oil and petrochemicals sector led the declines

In terms of sectors, power equipment surged sharply at one point. More than 10 stocks—including Sungeng Electric (300827), SFC Star (301658), Jinlang Technology (300763), AIVO New Materials (688680), Huabao New Energy (301327), Haimai Shares (688032), and ZL Group (002309)—hit the daily limit or rose more than 10%. Ai Jian Securities noted that the international environment in the energy sector is complex and severe, with geopolitical conflicts continuing to intensify. Photovoltaics and other new energy may be a new breakthrough to safeguard national energy security. Some products, including photovoltaics, will see VAT export tax rebates canceled starting April 2026. In the short term, this may increase domestic photovoltaic product shipment demand; in the long term, it may facilitate the clearing of outdated production capacity and optimize the capacity structure. It is recommended to pay attention to related targets in energy storage and photovoltaic-storage systems.

Communication stocks saw strong, volatile trading. Guoguang Technology (300620), Suniso S&ED (300502), and others rose more than 8%; Jinxih Xu Chuang (300308), Dingtong Technology (688668), and Sinocera Electronic (003031) and others rose more than 5%.

The public utilities sector strengthened. Jiuzhou Group (300040), Zhaoxin Shares (002256), Yinxing Energy (000862), Huadian Liaoning Energy (600396), Shao Neng Shares (000601), and Huadian Energy (600726) and others hit the daily limit or rose more than 10%.

The computer sector led the declines. Gu’ao Technology (300551), Jiechuang Intelligent (301248), Hongjing Technology (301396), and Oriental Guoxin (300166) and others hit the daily limit lower or fell more than 10%.

Defense and military industry stocks led the declines. Ganhua Ke Gong (000576) hit the daily limit lower at one point. Beidou Star-Connect (002151), Aerospace Development (000547), West Testing & Inspection (301306), Guansheng Technology (301213), and Guanglian Aviation (300900) and others fell more than 6%.

The oil and petrochemicals sector led the declines as well. Heshun Petroleum (603353) hit the daily limit lower. Qunyou Shares (002207), Potential Hengxin (300191), Taishan Petroleum (000554), Beken Energy (002828), Intercontinental Oil & Gas (600759), and PetroChina Oilfield Services (600871) and others fell more than 6%.

Short-term confidence in the A-share market and momentum for fund “going long” still need improvement

CITIC Securities? Zhongyuan Securities believes that the market’s key suppressing factor currently comes from abroad. The escalation of the Middle East situation has triggered turmoil across global capital markets. Concerns about “stagflation with delayed recovery” brought by a surge in oil prices have suppressed risk appetite. This has led to delays in expectations for Federal Reserve rate cuts and increased volatility in U.S. Treasury yields, which places valuation pressure on global equity assets—especially high-valuation technology growth stocks. Considering that domestic macro-policy guidance is becoming clearer, it provides a solid bottom-line support for the market. The central bank has clearly said it will flexibly use tools such as reserve requirement ratio cuts and interest rate cuts to keep liquidity abundant. At the same time, it also supports Central Huijin Investment & Management Co., Ltd. to play a role similar to a “stabilization fund” to boost the market’s firm confidence in the subsequent market trend. It is recommended to closely monitor macroeconomic data, changes in overseas liquidity, and policy developments.

Huarong Securities believes that as crude oil prices continue to rise and peripheral markets adjust consecutively, after A-shares open lower, they may accelerate in their push lower. In terms of the move, the Shanghai Composite Index broke below the prior low and challenged the 4,000-point level at the close; moving averages are in a bearish arrangement. The ChiNext Market is relatively more resilient, mainly due to recent strong support from large-cap energy stocks. In the short term, investors may pay attention to support around the 4,000-point level of the Shanghai Composite Index, as well as expectations for a technical rebound that may appear after the accelerated adjustment.

Caitong Securities? Cifang Securities? (财信证券) believes that currently, on the technical side, the Shanghai Composite Index is already at the lower end of the range-bound fluctuation box. However, with repeated shocks from overseas macro disturbances, and as A-shares are about to enter the earnings report season, the market’s confidence and funds’ momentum to go long still need to improve in the short term. If the overall market cannot quickly repair, it may break below the range-bound fluctuation box and continue downward. It is recommended to appropriately control position sizes and wait for signs of a market rebound. Looking at the medium term, with fiscal and monetary policy continuing their “two-loose” stance, residents’ savings assets continuing to enter the market, “anti-self-inflicted over-competition” improving listed companies’ earnings, and global AI technology still making ongoing breakthroughs—all driven together—the foundation of this round of A-share market rally remains firm. It is expected that the Middle East conflict will only affect the A-share market’s short-term sentiment and market operating rhythm, but will not change the market direction. The positive trend for the market in the long run should remain a source of confidence, and investors should not worry too much.

Huarong Securities’ research report states that against the backdrop of geopolitical disturbances, multiple favorable factors still support the market to operate in a stable manner. First, economic resilience is strong. On the investment side, in the first year of the “15th Five-Year Plan and 5-year period” (“十五五”) kickoff, efforts across the board seize opportunities, promote the start of major engineering projects, and drive a rebound in investment. Second, policy expectations are stable. In the 2026 “Government Work Report,” it is proposed to continue deepening comprehensive reforms of capital market investment and financing, further improve the mechanisms for medium- and long-term funds to enter the market, and refine investor protection systems. Third, uncertainties are gradually priced by the market.

Tianfeng Securities’ research report states that the previous bull market ultimately ended with differentiation in industry valuations, with valuation dispersion across sub-industries remaining at a relatively high level. Among industries currently trading at high valuations, nearly half were already at high valuation levels in the third quarter of 2024. With the remaining liquidity driving the decline in risk-free rates at the denominator end, an overall valuation-expansion effect may occur for the industry. Since the second half of 2024, growth stocks—more sensitive to discount rates—have outperformed value stocks. Looking ahead, in terms of space, remaining liquidity is approaching historical highs; in terms of time, it is possible that the PPI turns positive and that real-economy demand recovers. In the medium-to-long term, the logic of pricing at the numerator end is being raised, which may drive the balance of sector rotation further toward “rising earnings.” The reason the price-rising line has become one of the main themes is that rising prices are the most direct form of “rising earnings.”