On March 26, the market underwent a volatile adjustment, with the three major indices experiencing a pullback after earlier gains, each declining over 1%. The STAR 50 Index fell more than 2%. At the close, the Shanghai Composite Index was down 1.09%, the Shenzhen Component Index dropped 1.41%, and the ChiNext Index declined 1.34%.
By sector, the power sector showed active performance, lithium battery material stocks repeatedly strengthened, and the commercial aerospace concept saw localized gains. On the downside, the power grid equipment concept weakened, and the optical fiber concept trended downward.
More than 4,400 stocks declined across the market. The trading volume of the Shanghai and Shenzhen stock exchanges fell below 2 trillion yuan, shrinking by 236.2 billion yuan compared to the previous trading day.
Following two consecutive days of rebounds, the A-share market saw a volume-shrinking correction today.
The reasons are roughly twofold: First, the seesaw effect of "rising oil prices and falling stocks" today again favored oil prices. In the afternoon, both Brent crude futures and WTI crude futures strengthened. Reports indicated that on Wednesday, the United States and Iran made successive statements, bringing clarity to the situation. Iran stated that information exchange with the U.S. occurred through mediators and was not a negotiation, while the White House insisted that U.S.-Iran talks "are still ongoing." Some views suggest that regardless of daily updates from the "Rashomon" of U.S.-Iran negotiations, as long as the conflict does not substantially end, the logic supporting stronger oil prices remains. Market participants may gradually become desensitized to the news, but completely ignoring it is difficult.
For instance, strategists from J.P. Morgan's market intelligence team stated they have ended their previous tactical bearish rating on stocks and adopted a neutral stance. However, the bank still expects market volatility to intensify further.
Second, after consecutive rebounds, the market also needed to consolidate profits. It is not that the market "cannot rise for three consecutive days," but when objective resistance to upward movement outweighs downward pressure, a correction naturally occurs. A pattern of "two steps forward, one step back" is generally acceptable to the market—but if gains are excessively surrendered, it will inevitably trigger new panic.
One perspective holds that the "broad rebound" triggered by short-term oversold conditions can be seen as a "bonus for all stocks," but the extent and duration of this bonus vary randomly across different sectors and individual stocks. The intensity and speed of the rebound determine that during this rising phase, sectors and stocks may form new strength hierarchies.
Wind data shows that during the consecutive rebounds on Tuesday and Wednesday, the average maximum gain for all A-shares (from the lowest point) was 5.85%. Among nearly 5,500 stocks in the market, 3,531 saw maximum gains exceeding 5.85% during the same period. However, only slightly over 1,000 stocks achieved cumulative rebound gains of more than 10% over the two days.
Against this backdrop, short-term funds need to engage in some "weeding out the weak and retaining the strong" to seek additional excess returns. The market's adjustment after a broad rebound reflects this process of fund repositioning.
In the medium to long term, the Shenwan Hongyuan strategy team believes the fundamental basis for the A-share market's upward trend remains unchanged. They state that while rising oil prices may bring mild stagflation, due to China's low inflation base and mature policy framework for addressing structural economic issues, the cost pressures facing A-shares will be significantly less than in historical extreme cases (such as 2010-2011 and 2021). Furthermore, midstream manufacturing industries are still in a historically significant supply clearance cycle, with capacity growth rates expected to be lower than revenue growth rates by the second half of 2026. It is anticipated that the trend of effective profitability recovery and sequentially rising cumulative year-on-year profits for A-shares in 2026 remains unchanged. The medium-term upward trend in A-shares has a fundamental basis.
"China's economic advantages are prominent, and the long-term positive trend of China's capital market remains unchanged. Rapid changes in liquidity are not the norm for the A-share market. Some short-term issues have been overinterpreted as medium-term concerns. The short term may be the period of greatest pressure, but medium-term confidence should be firm, and patience maintained."
Looking at today's sector performance, besides oil and gas leading gains following oil price movements, energy metals, batteries, and other lithium battery industry chain directions, although pulling back from highs, retained some gains. Huaxin Securities stated that the core of the current Middle East geopolitical conflict lies in the revaluation of the "security attribute" of the energy system, reshaping global energy allocation models and macro transmission paths, with countries' energy policies shifting towards "independent control and diversified alternatives." Mapping this to A-shares, three directions benefit: new energy power generation, energy storage, and power grid equipment. New energy installation demand is shifting upward, the strategic position and profitability of energy storage are improving, and power grid and electrical equipment are entering an accelerated investment cycle.
Additionally, the commercial aerospace concept saw some fund inflows in the afternoon, briefly turning positive. On the news front, SpaceX plans to submit its initial public offering prospectus to regulators later this week or next week. The company may aim to raise over $75 billion in the IPO, higher than the previously reported estimate of $50 billion, with the company's latest valuation at $1.25 trillion.
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