Iran responds to U.S. ceasefire agreement, A-shares surge then retreat, Shanghai Composite temporarily recovers to 3,900

After five weeks of lingering tensions in the Middle East, early signs of easing are beginning to emerge. According to Xinhua News Agency, the United States and regional mediators are working toward reaching a ceasefire agreement, and Iran has also responded, stressing that the conflict must be permanently ended and ruling out the possibility of a temporary ceasefire. The potential agreement has also injected confidence into capital markets. On April 7, the A-share market—previously rocked by a downward rout—rebounded; the Shanghai Composite Index briefly regained the 3,900 level in the morning, then gave back part of its gains, reflecting that the market still has differences over how events will unfold. As of the noon close on April 7, the three major indexes were mixed: the Shanghai Composite Index was 3881.17, up 0.03%; the Shenzhen Component Index was 13325.83, down 0.20%; and the ChiNext Index was 3135.18, down 0.46%.

In terms of sectors and themes, the leading gainers were the glyphosate, pork, and organic silicon sectors; within the glyphosate sector, Jiangtian Chemical rose 14.13%, while Xin’an Shares, China Sinofarm Union, and others hit the daily limit. In the organic silicon sector, Dongyue Silicon Materials hit the 20CM daily limit.

Early Signs of Easing in the U.S.-Iran Conflict After Five Weeks

On the news front, early signs of easing have appeared in the U.S.-Iran conflict after five weeks. According to Xinhua News Agency, when U.S. President Trump accepted an interview with Israel’s Channel 12 television on the 5th, he said the United States is conducting “deep negotiations” with Iran and that it is “very likely” to reach an agreement with it before the final deadline on the 7th. Citing reports by Israeli media and information from sources, it is said that there are currently two communication channels between the U.S. and Iran: one is facilitated through countries such as Pakistan, Egypt, and Turkey; the other is direct communication among Trump’s envoy, Witkoff, Trump’s son-in-law Kushner, and Iran’s foreign minister Alraghi. The reports said that the mediators are trying to get the U.S. and Iran to agree on a series of measures.

Iran has also responded to the agreement’s contents. According to Xinhua News Agency, citing Iran’s Islamic Republic News Agency, on the 6th, after a two-week “comprehensive review” by Iran’s senior leadership, Iran has conveyed its response to the U.S. regarding its proposal to end the war to Pakistan. Based on “past experience,” Iran rejects a ceasefire and emphasizes that the war must be “permanently ended,” while taking Iran’s interests into account. This response includes 10 clauses, covering a range of Iran’s demands, including ending regional conflicts, formulating a secure passage agreement for the Strait of Hormuz, carrying out reconstruction, and lifting sanctions.

On the 6th, at a press conference held at the White House, U.S. President Trump said negotiations with Iran are “going very smoothly,” and he also said, “I can’t talk about the matter of a ceasefire, but I can tell you that the other side has a participant who is positive and willing to engage,” adding, “they hope to reach an agreement. Besides that, I can’t reveal any more.” However, he also threatened that if Iran fails to reach an agreement by 20:00 U.S. Eastern Time on the 7th to reopen the Strait of Hormuz, he will launch a four-hour airstrike campaign.

Yang Delong, chief economist of Qianhai Open-Source Fund, believes Trump’s stance has been inconsistent, making it hard to trust which of his statements is true, but it is an indisputable fact that the pressure Trump faces in the United States is steadily increasing. He is looking for a dignified way to end the war, unilaterally declaring that “the United States has won,” thereby finding a reasonable stepping stone for the military actions he has taken. If it drags into a prolonged war, it would have a major impact on the U.S. economy, and it would also affect Trump’s midterm elections, so he will not allow the war to drag on for too long. The possibility of ending the war within the next two or three weeks still exists.

Institutions: There Is Still Uncertainty in Short-Term Price Action

No Fundamental Change in the Logic Behind a Slow Bull / Long Bull Market

Yang Delong said that Trump’s back-and-forth stance on the war increases uncertainty in the market, and it directly leads to large swings in global capital markets as well. Since China’s A-share market is dominated by retail investors, fluctuations in market sentiment are even larger. Affected by the repeated, unpredictable changes caused by the Middle East conflict, the overall A-share and Hong Kong stock markets have shown a pattern of range-bound consolidation and adjustment. Recently, the market has repeatedly probed for lows, but the underlying logic behind this slow bull/long bull cycle has not undergone any fundamental change.

“Right now may be a relatively low point for A-shares in the medium term.” Li Jin, an analyst at CICC, said that although the short-term trend still has uncertainty, after going through adjustments, risks in the A-share market have been further released and valuations are at a relatively reasonable level. From a medium-term perspective, there has been no fundamental change in the macro environment in which the market operates; the logic supporting A-shares to “move forward steadily” still holds. The release of risk and the pullback/adjustment could bring better opportunities for allocation.

Yang Chao, the chief strategy analyst at China Galaxy Securities, said that the three major logics—policy support, funds entering the market, and the revaluation of Chinese assets—have not changed. The downside room for A-shares is relatively limited, and geopolitical conflicts outside the region have not shaken the long-term foundation of the A-share slow bull market. He suggested adopting a strategy focused on performance, while laying out positions opportunistically when opportunities arise.

A research report from Xingye Securities said that “the short term may still see an upgrade, while the medium term may shift toward a downgrade” remains the baseline scenario. For April, what should be given more attention is that the “market bottom” could be established as a result of a possible escalation of the situation, along with opportunities for positioning near the bottom. Also, after both sides enter substantive negotiations, the market may gradually return to normal, creating the opportunity to kick off a repair rally led by “I take the lead.”

A research report from China Merchants Securities said that looking ahead to April, the external risks facing A-shares have not been materially alleviated. The U.S.-Iran conflict carries the risk of an escalation beyond expectations. Against this backdrop, further upward pressure on oil prices would intensify concerns about global economic stagflation. If the U.S. military launches a ground offensive in mid-to-late April—whether due to combat casualties exceeding expectations or due to a surge in oil prices that triggers a deep pullback in global stock markets—then the Trump government may be forced to pivot toward a de-escalation strategy, and the market may end up playing out a typical dilemma-to-reversal style of rally.

Bylined and written by: Zhao Yuan, reporter from Nandu Bay Finance and Economics Media