On Monday, the A-share market experienced another round of adjustments. On March 23, the three major A-share indices fell by over 3%, with the Shanghai Composite Index pulling back to the 3,800-point level. By the close, the Shanghai Composite Index had dropped 3.63%, the STAR 50 Index fell 4.31%, the Shenzhen Component Index declined 3.76%, and the ChiNext Index decreased 3.49%.
In the ETF market, Huatai-PineBridge CSI 300 ETF saw its trading volume nearly double to nearly 6.8 billion yuan on Monday compared to the previous session. Significant buying interest emerged in late trading for E Fund ChiNext ETF, Southern CSI 500 ETF, ChinaAMC SSE 50 ETF, Southern CSI 1000 ETF, and Fullgoal Shanghai Composite Index ETF. At the product level, Fullgoal S&P Oil & Gas ETF and Harvest S&P Oil & Gas ETF both hit their daily upside limits. In contrast, 14 gold-themed ETFs fell by more than 9%.
Regarding the reasons for Monday's unusual volatility, post-market interviews were conducted with ten public fund companies. Multiple fund houses believe that the latest developments in the US-Iran conflict represent the most critical marginal variable for the current market. However, the decline in the equity market is clearly an "overreaction," and the long-term pricing core of A-shares remains domestic fundamentals. Market allocation strategies are leaning towards low-volatility assets, with sectors possessing clear industrial trends and景气度 showing greater resilience.
Caitong Fund stated that the core issue is the duration of high oil prices' impact on inflation, interest rates, and economic fundamentals. Monday's across-the-board adjustment in A-shares stemmed primarily from the dual pressures of unabated geopolitical risks and high oil prices impacting macroeconomic expectations. The lack of signs of easing or resolution in the US-Iran conflict over the weekend raised market concerns that persistently high oil prices would elevate global inflation and suppress economic fundamentals, leading to a rapid decline in risk appetite. Simultaneously, expectations of prolonged conflict have increased the stickiness of oil prices at high levels. Strengthening inflation expectations have bolstered the US dollar, while the gold sector faced pressure from profit-taking at highs and leveraged long positions, further exacerbating market避险情绪 and volatility.
Looking ahead, the progression of the US-Iran conflict remains the core variable for the market. The impact of high oil prices on RMB-denominated assets mainly manifests as temporary pressure on imports/exports and domestic demand. However, ongoing domestic policies aimed at stabilizing growth and expectations may provide some counterbalancing effect. The market is not solely trading on避险 or stagflation logic, so the overall situation remains controllable.
The current core market trading logic does not involve betting on a quick end to the conflict but rather focuses on the duration of high oil prices' impact on inflation, interest rates, and economic fundamentals. Against this backdrop, sectors with clear industrial trends and景气度 demonstrate greater resilience, with the AI sector likely remaining a key allocation direction. During periods of market turbulence, earnings certainty and delivery capability are the foundation of core assets. Focusing on high-growth, strong-performance quality stocks is expected to help navigate short-term geopolitical and macroeconomic fluctuations. Patience is advised.
Morgan Stanley Fund Management believes that market pricing has already become relatively ample. The overall suppressing factors for the market remain the stagflation risks brought by the Middle East situation, while domestically, cost increases are pressuring manufacturing profit margins. Alleviation of these concerns requires clarity in the overseas situation. Judging from recent developments, there has been no significant improvement, and the impact has exceeded expectations. Current crude oil prices are again approaching $110 per barrel, putting renewed pressure on inflation in many countries overseas. The European Central Bank and the Fed have remained on hold for the past few months, but if oil prices remain persistently high, there is a risk of interest rate hikes resuming, which would also affect global investment.
The domestic market is currently pricing in the global economic impact of changes in the overseas situation. With the rapid market decline over the past two days, pricing has already become relatively ample. Compared horizontally with other major manufacturing powers, China's manufacturing advantages are significant, and exports in certain sectors may benefit, so excessive pessimism is unwarranted.
China Europe Fund noted that the allocation value of low-volatility assets is gradually rising. Market risk appetite has declined rapidly, with geopolitical conflicts driving increased避险 demand. However, the decline in risk appetite is often trend-like. In the early stages of a shift in the macroeconomic scenario, markets often, driven by the inertia of optimism, seek out "beneficiary sectors" for trading. For example, last week's overseas optical module conference led to outperformance in the optical module sector, with the Philadelphia Semiconductor Index and the ChiNext Index simultaneously becoming focal points for funds in both the US and Chinese markets. However, other market sectors experienced a significant decline in risk appetite. Against the backdrop of rising volatility, due to expectations of a rebound in domestic PPI, attention is turning to defensive assets within the equity asset class, such as the dividend style. But if subsequent panic sentiment continues to amplify and triggers substantial oscillations, focus should shift to directions with long-term growth certainty.
Global inflation and increasingly tense geopolitical situations will further drive the performance of cyclical commodities. In the context of gradually increasing volatility, the allocation value of low-volatility assets is gradually rising. Attention can be paid to three directions: first, traditional low-volatility dividends; second, the coal chemical sector within the chemical chain, where profit margins may see better-than-expected improvements; and finally, the oil and gas sector benefiting from the long-term rise in product price centers.
Guotai Asset Management suggested that the short-term market might collectively seek避险 for about two weeks. After the outbreak of the US-Iran conflict, its duration has been significantly longer than mainstream market expectations, leading to substantial fluctuations in oil prices. Although developed countries are generally taking measures to stabilize oil prices, the effect is limited. Near-term oil prices are stable, while far-term prices are attempting to eliminate the discount. In this oil price environment, global inflation expectations are heating up, especially since some countries are already in a high inflation phase, leading to a reversal of policy easing expectations, rising bond yields, and damage to equity markets from a valuation perspective. Simultaneously, due to the market's consecutive declines, some absolute return participants have reduced positions, accelerating this process.
The current volatility stems more from market panic sentiment. Against the backdrop of liquidity disturbances and pressured risk appetite, the short-term market might collectively seek避险 for about two weeks. However, medium-term market style is expected to resume an upward trend, favoring large-cap growth, including growth-style AI hardware, and the new energy industry chain encompassing power grids, energy storage, and photovoltaics.
Bank of Shanghai Financial Asset Management Co., Ltd. stated that the decline in the equity market is clearly an "overreaction." Although the logic of energy prices dragging down economic growth, which the market fears, is not unfounded, Monday's decline in the equity market is clearly an "overreaction." Looking ahead, over a 1-3 month horizon, key observation points for the Middle East conflict mainly include the actions of US ground forces, damage to oil-related infrastructure, and the timing of Sino-US leader meetings. Additionally, close attention should be paid to the extent of the decline in US stocks and domestic US attitudes towards the war. If liquidity risks continue to spread, it might force the Fed to expand its balance sheet to provide liquidity (the Fed chair transition point is in May).
Therefore, a dual approach should be adopted to address potential future changes: First, in the short term, amid high macroeconomic uncertainty, wait to enter the market after the release of liquidity risks, signaled by features such as a weakening US dollar, stabilizing gold, or market oscillations showing structural differentiation. Second, for relative returns, focus on sectors related to the rising center of energy prices and the enhanced energy resource security strategy, and pay attention to sub-sectors that might potentially benefit from supply chain disruptions (such as semiconductors, food, fertilizers, etc.) and potential stabilizing forces like the financial sector.
Bosera Funds emphasized that the long-term pricing core of A-shares remains domestic fundamentals. Looking ahead, the short-term market may be highly sensitive to the evolution of the geopolitical situation. The实质受阻 state of the Strait of Hormuz, whether energy facilities are attacked by either side, and whether the conflict spills over to other oil-producing countries will directly determine the center of oil prices and global inflation expectations.
In this highly uncertain phase, the dividend sector, characterized by high dividends and stable cash flows, may possess certain defensive value. From a medium to long-term perspective, the pricing core of A-shares remains domestic fundamentals – the Two Sessions clearly defined the economic growth target range, and macro policies continue an积极的取向. However, short-term external risks have not been fully released, and investors need to remain cautious. It is advisable to reasonably control positions in the short term and wait for the situation to become clearer.
Ping An Fund sees a good timing emerging for allocating to A-shares and Hong Kong stocks. From a medium to long-term perspective, the Chinese economy still possesses resilience and structural opportunities. This year's Two Sessions have clearly set the annual economic growth target, and fiscal and monetary policies remain inclined towards stimulus, with industry support centered on technology further strengthened. Under the rapid impact of this round of external negative factors, a good timing for allocating to A-shares and Hong Kong stocks may反而 appear. It is recommended to select sectors and individual stocks with strong fundamentals and broad long-term growth prospects.
In terms of allocation direction, it is recommended to focus on three main themes: the technology growth sector benefiting from policy support and industrial upgrading; high-dividend assets with stable cash flows and分红 capability; and the upstream energy and大宗商品 sectors benefiting from the rising center of resource product prices.
Overall, the short-term market may still maintain a high-volatility pattern, but the medium to long-term logic remains intact, and structural opportunities are still worth actively grasping.
Virtua Australia Fund anticipates that global equity assets may continue to oscillate. In the short term, the US-Iran conflict may remain the core factor pricing global assets. Before the geopolitical situation clarifies, global equity assets may continue to oscillate, and the trend of the US-Iran conflict should be closely watched.
From a medium-term perspective, on one hand, after recent consecutive adjustments, the selling pressure in the A-share market may have been somewhat released. As the country with the world's most complete industrial system, the safety and stability characteristics of Chinese assets are expected to show relative resilience. On the other hand, with the积极的 policy stance at the start of the "15th Five-Year Plan" and the policy orientation of "seeking progress while maintaining stability, improving quality and efficiency" for 2026, the economy continues its recovery. As time enters the traditional peak season for economic activity, the impact of improving price conditions on A-share profit recovery remains noteworthy.
Additionally, with the approaching disclosure period for listed companies' 2025 annual reports and this year's first-quarter reports, the impact of the earnings factor on the market is expected to increase, and related high-performance themes are worth attention.
Lion Fund suggests balancing defense and growth opportunities going forward. Facing a macroeconomic environment characterized by liquidity disturbances and pressured risk appetite, market allocation strategies are trending towards a "HALO PLUS" strategy. The defensive end (HALO) continues to focus on sectors with high cash flows, heavy assets, high industry barriers, and low correlation to TMT, such as coal, utilities, and construction, to hedge against macroeconomic fluctuations. The offensive end (PLUS) focuses on growth directions with still-low trading拥挤度 and weak sensitivity to interest rates, such as commercial aerospace, batteries, and space photovoltaics. Simultaneously, the military theme against the backdrop of geopolitical conflict and sectors benefiting from the autonomous controllability logic are also receiving attention.
Manulife Fund observed weakening risk appetite and prominent bottom valuation characteristics. Recently, global markets have been disturbed by dual factors: the central bank policy cycle and geopolitical conflicts. The stagflation trading logic continues to play out, with significant divergence in the performance of various assets. The domestic equity market exhibits a pattern of weakening risk appetite and prominent bottom valuation characteristics.
Considering the current market situation, short-term investment needs to focus on low-valuation recovery and high-earnings certainty sectors to avoid risks. In terms of sector allocation, adjusting the automotive sector from underweight to standard weight, the chemical sector from standard weight to overweight, and the computer sector from standard weight to underweight can serve as a reference for subsequent sector allocation.
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