The trading volume of A-shares has fallen below 2 trillion yuan. After a decline in volume and a pullback, when will it stabilize?

Ask AI · Why investors brought risk-avoidance actions forward to Thursday?

After two consecutive trading days of rebound, Thursday saw the A-share market pull back on lower volume.

On March 26, all three major A-share indexes closed down by more than 1%. Among them, the Shanghai Composite Index fell 1.09%, to 3,889.08 points; the Shenzhen Component Index fell 1.41%, to 13,606.44 points; and the ChiNext Index fell 1.34%, to 3,272.49 points.

For the market’s renewed adjustment, analysts believe it is mainly due to recurring overseas geopolitical disturbances, the need for the market technical setup to digest the pressure, and investors bringing risk-avoidance actions forward, among other factors.

“A key logic behind the market’s overall performance recently that has been less than satisfactory is still overseas disturbances. Whether it’s the inflation and liquidity pressure brought by higher oil prices, or the transmission impact from volatility in overseas equity markets to some degree, all of it is caused by localized geopolitical conflicts. On Thursday (March 26), the easing expectations did not materialize. With funds worried that the situation could keep flipping back and forth, risk-averse sentiment naturally warmed up.” a broker strategy analyst said to a reporter from The Paper.

Zhang Gang, an analyst at Zhongyuan Securities, also believes that the market’s current core headwinds come from overseas. If localized geopolitical conflicts further escalate, it could lead to sustained higher oil prices and worsen global stagflation pressures. If U.S. inflation continues to run above expectations, the Federal Reserve may delay rate cuts or even resume rate hikes, which would weigh on global liquidity and risk appetite.

On the technical side, according to Guojin Securities, as the A-share market’s technical indicators have reached a resistance level, the market needs to digest the rebound over the first two trading days. The Shanghai Composite Index had previously surged all the way to the resistance level near 3,930 points. After the rapid rebound, the market itself has a need to digest profit-taking and consolidate positions. Some funds often choose to realize gains at this point, which in turn triggers stop-losses on the technical trading book.

It is worth noting that, regarding Thursday’s market pullback, multiple analysts pointed to the factor of “bringing risk-avoidance forward.”

Guojin Securities, for instance, said that under a “learning effect,” the reason risk-avoidance was moved up to Thursday instead of waiting until Friday is crucial. Looking back at the past two weeks, several escalations in the overseas situation happened over the weekend. So with funds worrying that something could go wrong on the weekend, they chose to take risk-avoidance actions in advance on Friday. On March 26, this risk-averse sentiment was pushed even further forward to Thursday.

“Over the weekends in the past few weeks, the overseas news flow has basically not been good, and there has been quite a lot of uncertainty from external events. One reason for Thursday’s market adjustment is also the fact that the weekend is approaching.” said a chief investment strategist at a Shanghai-based brokerage.

After a multi-factor coordinated plunge, what will the A-share market do next?

In response, the broker strategy analyst mentioned above said: “It can still be advisable to watch more and do less, and closely monitor the latest developments in overseas geopolitical disturbances. If the situation eases, it will bring a boost to the performance of equity assets. At the same time, you also need to pay attention to the actual status of navigation through the Strait of Hormuz and the resulting performance of crude oil and other assets.”

On the latest news front, according to Xinhua News Agency, U.S. President Trump posted on social media on March 26, saying that the airstrike on Iran’s energy facilities has been postponed by 10 more days, to 8:00 p.m. Eastern Time on April 6.

In addition, multiple analysts also mentioned the issue of trading volume during the A-share adjustment process on Thursday (March 26).

Guojin Securities said that the lower volume during Thursday’s decline is an easily overlooked signal. A decline on lower volume indicates that panic selling has been cleared to a large extent during the first two rounds of adjustments. The current selling pressure is more strategic rather than systemic.

“One of the better signs on Thursday is the lower volume, which was very small. This trading volume shows that although there wasn’t much buying, the selling pressure wasn’t heavy either.” said the above broker’s chief investment strategist.

Wind data shows that after 22 trading days, the A-share market’s trading value fell again to below 2 trillion yuan. On March 26, the market’s trading value was 1.96 trillion yuan.

Regarding operations, Guojin Securities said that in the next stage, the market may need to repeatedly confirm support levels. After Thursday’s plunge, the market will likely enter a period of consolidation and range trading. This process may last for several days, with the aim of digesting the earlier profit-taking positions and making the position structure a bit more stable.

“Among them, 3,889 points is very critical. This level is near the prior lows and also the convergence point of multiple moving averages. If the market manages to hold this level next, the rebound structure will still be intact; if it is broken effectively, then both the duration and the potential magnitude of the adjustment may be extended.” Guojin Securities further noted.

Zhang Gang expects that in the future the Shanghai Composite Index is likely to remain in a range-bound pattern. He advises investors to closely watch macroeconomic data, changes in overseas liquidity, and policy developments. For short-term opportunities, he suggests focusing on sectors such as batteries, energy metals, chemical products, and robots.