Shanghai Composite Index falls below 4,000 points; ChiNext Index hits a new high. Pay attention to news developments amid external disturbances.

This week, amid factors such as geopolitical conflicts, the overall market has shown a volatile trend of dipping and probing for lows. The Shanghai Composite Index fell 3.38% to close at 3957.05 points; the Shenzhen Component Index fell 2.90% to close at 13866.20 points; the ChiNext Index rose 1.26% to close at 3352.10 points; the STAR 50 Index fell 4.03% to close at 1318.31 points; and the CSI 300 Index fell 2.19% to close at 4567.02 points. Insiders believe that although the Shanghai Composite fell below 4000 points on Friday, statements from the People’s Bank of China and the China Securities Regulatory Commission to stabilize the market mean investors should not be overly pessimistic in the near term. As support measures gradually increase, the stock index is expected to stabilize step by step. Looking ahead, while monitoring changes in the news landscape, investors can continue to track the trends in sectors such as photovoltaics, communications equipment, and power.

The ChiNext Index rose against the trend this week

Affected by ongoing Middle East geopolitical conflicts and other factors, the overall market this week saw a volatile downward move. The Shanghai Composite Index closed slightly positive only on Wednesday; on the other trading days, it closed in the red. On Thursday, the Shanghai Composite Index briefly dipped below 4000 points during the trading session, before being pulled back at the close. On Friday, the broader market failed to stop the decline; at the close, it set a new period low again, falling 3.38% for the week. Worth noting is that, faced with the market’s adjustment, the ChiNext Index rose against the trend this week, up 1.26%, performing the strongest among several major indices. In particular, on Friday, the ChiNext Index surged by more than 3% at one point during the session and hit a new high since the rebound. According to data from Tonghuashun, among ChiNext constituent stocks, the top 10 stocks by weekly gain were NewEase (Xin Yisheng), Fulin Precision Industry (Fu Linyuan?; “富临精工”), Jinko? (Jinlang?), Luxshare? (“锦浪科技”), Zhousheng Micro? (“卓胜微”), MStar? (In the text: 中际旭创), Mav? (迈为股份), Anker Innovations? (安克创新), Dahua? (大族数控), Kunlun Wanwei (昆仑万维), and Jieswell? (捷佳伟创). On the decliners list, stocks such as BlueFox? (蓝晓科技), Fei Li Hua (菲利华), Sinocera? (国瓷材料), SoftLink Power (软通动力), Guangwei Resene? (光威复材), Co-Create Data (协创数据), Falcon New Materials? (中伟新材), Jinli Magnetics (金力永磁), Aimeike (爱美客), and Kema Technology (珂玛科技) were among those with the largest declines.

The CSI 300 Index held up relatively better this week. Data show that among CSI 300 constituent stocks, the top 10 by weekly gain were NewEase (新易盛), Zhousheng Micro (卓胜微), 中际旭创, Zhongyou Capital (中油资本), Anke Innovation (安克创新), China Merchants Shipbuilding? (招商轮船), Kunlun Wanwei (昆仑万维), CITIC Bank (中信银行), COSCO SHIPPING Energy? (中远海能), and BaiLi Tiantian? (百利天恒). On the decliners list, China Energy Engineering (中国电建), Nanshan Aluminum (南山铝业), Yunnan Aluminum (云铝股份), Aluminum Corporation of China (中国铝业), Rongsheng Petrochemical (荣盛石化), China Gold International (中金黄金), China Energy Construction (中国能建), Shandong Gold (山东黄金), Tongling Nonferrous (铜陵有色), and Shandong Hualu Hengsheng (华鲁恒升) were among those with the largest declines.

With the continued adjustment of the broader market, the People’s Bank of China and the CSRC have issued statements one after another to stabilize the market. According to the PBOC website, on March 18, the CPC Party Committee of the People’s Bank of China held an enlarged meeting. The meeting noted that it is important to fully leverage the central bank’s macro-prudential management and financial stability maintenance functions, and firmly safeguard the steady operation of financial markets such as stocks, bonds, and foreign exchange. A liquidity support mechanism for non-bank financial institutions under specific scenarios should be studied and established. Work with relevant departments to continue striking down illegal financial activities in a high-pressure posture. Also, according to the CSRC website, on March 19, the CSRC held a symposium with investment institutions on the “15th Five-Year Plan” for the capital market (“十五五”). At the symposium, everyone agreed that in recent years, facing complex and severe circumstances, under the strong leadership of the CPC Central Committee and the State Council, the CSRC—together with relevant parties—has made important breakthroughs in building a China-characteristics mechanism for stabilizing the market, promoting medium- and long-term funds to enter the market, and improving investor returns, among other areas, strengthening the resilience of the capital market and enhancing its ability to withstand risks.

Communication sector up 2.10% for the week

Judging by the performance of this week’s sector (Shenwan Level-One industry), communications and banking rose against the trend, with weekly gains of 2.10% and 0.36%, respectively. Sectors that held up relatively better included food and beverage, public utilities, coal, non-bank financials, transportation, and biopharmaceuticals, among others. On the decliners list, sectors such as non-ferrous metals, basic chemical industry, steel, construction materials, and others led the declines.

The communications sector’s weekly gain exceeded 2%. For individual stocks, NewEase, 中际旭创, Dingtong Technology (鼎通科技), Mingtong? (铭普光磁), Pingzhi Information (平治信息), Century Hengtong (世纪恒通), Century Dingli (世纪鼎利), Dingxin Communications (鼎信通讯), and others led the gains. Among them, NewEase surged 21.07% over the week, and on Friday its stock price also hit a new all-time high. CITIC Securities said that as the volume of communications data increases, the required transmission rate for optical modules also gets higher. 800G optical modules began mass production in 2023, and from 2024 to 2026 they will maintain rapid growth; 1.6T optical modules are set to start shipping in 2025, and in 2026 are expected to continue expanding in volume, and the entire optical module industry chain is entering a favorable cycle in which both volume and price rise together. Soochow Securities believes that AI computing power drives generation-to-generation upgrades of optical modules, and equipment demand is entering a high-boom cycle. With demand expansion combined with technological upgrades, relevant equipment manufacturers will see structural opportunities.

The reporter noted that during the market adjustment on Friday, the power equipment sector rose by more than 1.12%, and among the sector’s stocks, seven hit the daily trading limit. In terms of news flow, on March 20, a market rumor said that Tesla’s team planned to purchase a large-scale amount of China’s photovoltaic equipment, involving several listed companies.

Institutions believe that under the dual catalysts of Musk’s “space solar” strategy and the accelerated construction of China’s satellite internet at home, the photovoltaic industry is entering entirely new application scenarios and additional growth space. Guojin Securities said that the persistent escalation of the North American power shortage, together with breakthroughs that could drive sharply lower satellite manufacturing and launch-insertion costs—such as the mass production of space solar products, successful recovery of Starships, etc., rather than the sustained extension of gas-turbine order cycles—may make adoption happen faster. China Merchants Securities said that this round of North American photovoltaic capacity expansion will lead to a re-rating of value for related domestic auxiliary materials, equipment, and leading manufacturers. Meanwhile, although current photovoltaic demand for low-orbit satellites is small, as it grows rapidly, space solar could grow into a large market in the future.

Watch for changes in the news

For next week’s market, insiders believe investors should not be overly pessimistic in the near term and can watch for changes in the news environment.

Tianfeng Securities said that the surge in demand for artificial intelligence computing power has drawn high attention to the pressure on electricity usage in data centers. With policy catalysts, this week’s new energy infrastructure construction sector saw a clear increase in attention. In terms of impact, the “compute-and-power coordination” policy is generally a positive for leading industries as a whole, helping open a second growth curve for new energy business. If policy tailwinds continue to be released, new industrial models such as “direct green power connections” can accelerate implementation, and this could further lift attention on the new energy infrastructure construction sector.

CITIC Securities pointed out that risks of production shutdowns—possibly caused by Samsung Electronics calling for a nationwide general strike—may further exacerbate global supply tightness for memory chips. In a high-boom memory market environment, they are optimistic about the domestic leading memory manufacturers increasing market share. During the “15th Five-Year Plan” period (“十五五”), domestic leading memory manufacturers’ capacity expansion and technology iteration are expected to accelerate, and core materials and component suppliers along the industrial chain are expected to fully benefit.

A analyst at Huaxin Securities told reporters from the “People’s Securities News” (“大众证券报”): “This week, the broader market saw volatile adjustments, and low-valuation blue-chip stocks clearly held up better, playing a good role in protecting the index. After the Shanghai Composite Index fell below the 4000-point level, the market may continue to probe lower in the near term, but there isn’t much room downward anymore. Given the stabilization signals from the PBOC and the CSRC, investors should not be blindly pessimistic in the near term; they can pay more attention to changes in the news over the weekend. Next week, investors can continue to track the trends in sectors such as photovoltaics, communications equipment, and power.” Reporter Tang Xiaofei