The Middle East geopolitical situation remained complex this week, with alternating positive and negative developments. Most broad-market indices experienced a rebound followed by further adjustments. Looking ahead, given the intricate nature of the ongoing Middle East tensions and the "spiral escalation" of conflicts, global capital markets are expected to remain under pressure. The A-share market may continue to exhibit a volatile consolidation pattern. In the short term, the Shanghai Composite Index is projected to move within a defined range, seeking a secondary bottom. The "second foot" of this double-bottom formation is anticipated to take shape gradually in mid-to-late April, potentially leading to a weekly-level rebound. Over a longer horizon, the continuation of a "systematic slow bull" market pattern will depend on whether the market can hold above the 2024 "Bull 1" high and subsequently make a "strong" return to its original fluctuation range when challenging the 4000-point mark.
In terms of allocation, based on the assessment that "geopolitical escalation increases global volatility while A-shares seek a secondary bottom," a cautious approach is recommended in the near term. Investors should treat the market as range-bound: when indices approach the upper boundary of the new range, avoid greed and consider appropriate profit-taking; when indices fall to the lower boundary, overcome fear and consider moderate bargain-hunting. If the Middle East situation becomes clearer after mid-April and a medium-term bottom structure forms in A-shares, investors may then consider actively increasing allocations to enhance portfolio flexibility.
**Market Overview for the Week (2026-03-30 to 2026-04-03)** (1) Major Indices: The complex Middle East geopolitical situation led to short-term rebounds in most broad-based indices, followed by continued adjustments. (2) Sector Performance: Communications and consumer sectors saw gains, while dividend-paying stocks demonstrated resilience and energy sectors led declines. (3) Market Sentiment: Trading volume on the Shanghai and Shenzhen stock exchanges decreased. (4) Fund Flows: Margin lending balances saw a slight decline, and equity ETFs experienced net outflows. (5) Quantitative Indicators: Valuations of major indices are moderately high.
**Key Drivers for the Week** (1) The Monetary Policy Committee of the People's Bank of China held its first-quarter regular meeting for 2026. (2) The total value of China's innovative drug out-licensing deals exceeded $60 billion from January to March 2026.
**Outlook for the Coming Week** Looking forward, considering the complexity of Middle East instability and the de facto "spiral escalation" of conflicts, global capital markets are expected to remain under pressure. The A-share market, unable to decouple, may continue its volatile consolidation. The Shanghai Composite Index, due to its previous rapid decline, has formed a "high-volume trading zone" above 4000 points, making the 4000–4040 range the upper boundary of its fluctuation zone. Recent trading patterns clearly indicate that the 0.382 Fibonacci retracement level of the "Bull Wave 3" since last April, down to the 3800-point integer mark, has now become a strong support level (the lower boundary of the fluctuation zone). The index is expected to continue its range-bound movement, seeking a secondary bottom, with support at the lower boundary and resistance at the upper boundary. The formation of the "second foot" of the double bottom is anticipated in mid-to-late April, potentially triggering a weekly-level rebound. Over the longer term, the sustainability of a "systematic slow bull" market depends on holding the 2024 "Bull 1" high and making a strong return to the original range when challenging the 4000-point level.
Regarding allocation strategy, based on the view that "geopolitical escalation drives global volatility while A-shares seek a secondary bottom," a cautious near-term approach is advised. Treat the market as range-bound: take profits near the upper boundary and buy selectively near the lower boundary. If the Middle East situation clarifies after mid-April and a medium-term bottom forms in A-shares, investors can then consider increasing allocations to capture potential upside.
**Risk Warning** Domestic economic recovery may fall short of expectations; global geopolitical uncertainties persist.
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