External markets plummeted; what will stabilize the A-shares today? Second-quarter allocation strategies revealed

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Source: The Daily Economic News

On March 30, the A-share market opened lower and then turned higher, but the three major indices saw mixed movement. By the close, the Shanghai Composite Index rose 0.24%, the Shenzhen Component Index fell 0.25%, and the ChiNext Index fell 0.68%. The combined trading value of the three markets—Shanghai, Shenzhen, and Beijing—exceeded 1.9 trillion yuan, representing a slight increase in volume compared with the previous trading day.

On individual stocks, the number of advancing stocks exceeded 2,800, and more than 70 stocks hit the daily limit. Sectors such as precious metals, industrial metals, aerospace equipment, nonferrous metals, pharmaceutical distribution, and agricultural chemical products led the gains, while sectors such as power, utilities, photovoltaic equipment, and insurance led the declines.

In the morning session, A-shares opened lower. The Shanghai Composite Index broke below the 3,900-point level immediately at the open, but later it gradually recovered after a second dip.

The broad market’s lower open was within expectations. Multiple unfavorable factors weighed on sentiment, including the overnight sharp drop in U.S. stocks, the escalation of conflicts in the Middle East, and international oil prices rising. As a result, overseas markets collectively cooled off. In the Asia-Pacific region, the Japan and South Korea stock markets—which opened slightly earlier than A-shares—opened sharply lower, with the Nikkei 225 and the KOSPI indices both falling by more than 5%. In addition, U.S. stock index futures, gold, and silver also moved lower. Global risk-avoidance sentiment continued to heat up.

On the news front, the Middle East conflict has been going back and forth. According to observations by a CCTV News reporter, the current conflict between the U.S. and Iran continues to show an intense and stalemated state. Iran has increased the力度 of its attacks on the U.S. and Israel, while the scale and frequency of airstrikes on Tehran have also clearly increased. In addition, on the 28th, Emirates Global Aluminium Company said its plant located in Abu Dhabi was attacked by Iran; on the 29th, Bahrain Aluminium Company also confirmed that some of its facilities were attacked by Iran. These developments further exacerbated market volatility, and the geopolitical risk premium has continued to run at a high level. International oil prices surged—ICE Brent Crude successfully climbed above $108 per barrel—and LME aluminum jumped by more than 5%.

Against this backdrop, it should be said that today’s A-share performance, despite the general pressure on global capital markets, has displayed strong resilience against the tide. It has performed significantly better than expected, confirming the view that A-share performance will show “independence.”

The rapid restoration of market confidence depends on the sustained push from the policy toolbox and the proactive guidance from regulators. On March 30, the People’s Bank of China (PBOC) announced that on that day it would conduct a 7-day reverse repo operation totaling 269.5 billion yuan. Because 80 billion yuan of reverse repos matured, there was a net injection of 261.5 billion yuan, effectively offsetting funding pressure caused by unfavorable external factors.

Earlier, when PBOC Governor Pan Gongsheng delivered a keynote speech at the “2026 China Development High-Level Forum,” he said the central bank will stick to a supportive monetary policy stance, creating a favorable monetary and financial environment for stable economic growth, high-quality development, and the smooth operation of financial markets. With recent external news shocks weighing on A-shares, this move by the PBOC undoubtedly gives the market a dose of reassurance.

That said, it’s worth mentioning that compared with today, tomorrow (March 31) will mark the A-share close for the first quarter. Coupled with factors such as quarter-end fund settlement and institutional portfolio rebalancing, tomorrow’s market volatility and capital behavior will carry even more signaling significance, becoming a focal point for market attention.

As for the back-and-forth patterns in the recent market trend and the upcoming Q2 allocation approach, we can refer to the thinking of Muu Yiling, Chief Strategist at Guojin Securities:

In his latest weekly strategy report, he pointed out that the essence of the market downturn is the dollar’s comeback. Under the brewing effects of the new U.S.-Israel-Iran conflict situation and the earlier disruption of energy supplies, the slope of “a strong dollar” has eased. On the one hand, the U.S.-Israel-Iran conflict is beginning to show characteristics of long-termization but controllability: a negotiation window between the U.S. and Iran is visible, but both sides continue military strikes. On the other hand, the Strait of Hormuz has been sealed off for a full month now. The sharp rise in oil prices has started to put pressure on inflation in various countries. Against this backdrop, non-U.S. central banks have put rate hikes on the agenda as well, which also forms a constraint on the “strong dollar.” The U.S. Dollar Index reaching its peak, market expectations of further Federal Reserve hikes cooling, and U.S. assets’ declines collectively constrain the intensity of the conflicts—these together constitute the feature that risk assets have started to hit bottom.

He summarized the “Trump” asset price cycle: a pressure → compromise loop.

He noted that during both of Trump’s terms, there is the same pattern of behavior: to achieve the final objective, he first applies extreme pressure to the target, and then proactively creates room for easing in exchange for the other side accepting the conditions (i.e., TACO). If the conditions are not met, pressure is applied again, and the cycle repeats. However, this behavior pattern, in fact, failed to achieve “America First” success in the 2018 to mid-2020 U.S.-China trade frictions, in the 2018 to 2020 sanctions related to Iran’s withdrawal from the nuclear deal, and in 2025 when the “reciprocal tariffs” were imposed globally. Instead, the U.S. Dollar Index has generally weakened in the later stage. In addition, the规律 of asset performance includes: (1) during the pressure period, risk assets fall, the VIX index rises, and copper and oil fall. Most of the time this reflects suppression of total demand for the economy; while during the TACO period, it is the opposite trade, and the direction for gold and the dollar is not necessarily the same. (2) As time goes on, the rebound magnitude of the above assets after TACO will clearly decline, because past examples have taught the market that “pausing isn’t the same as solving—it only shifts the risk.”

Muu Yiling said that the magnitude of each round of TACO trading will decay, and the market will no longer trade solely around frictions/conflict itself, but will start to focus on the medium-term main line. For A-shares, within three dimensions, there are clear main lines and the optimal assets. The first is the energy main line that has already started and is directly related: the U.S.-Iran conflict shows “long-termization” characteristics; the Strait of Hormuz remains continuously closed; crude oil transportation is still obstructed. Even if navigation resumes, the loss of supply and panic about inventories will keep raising the energy price core level for a long time. Meanwhile, the sharp increase in old energy prices will also accelerate the replacement with new energy. In China, domestic battery companies’ production schedules for March have risen sharply month-on-month. The second layer is the dollar peaking and then falling back—commodity rebounds driven by the monetary attribute. At this time, stocks along the “price-increase chain” start to outperform the corresponding commodities. Third, from a manufacturing advantage perspective—because the energy shock strengthens—China, despite being “poor in oil and scarce in gas” in terms of resource endowment, still has relatively ample current crude oil inventory, one primary energy that is自主 and controllable dominated by coal, and new energy industry chain advantages. Together, these become long-term advantages in responding to the world’s new pattern of reindustrialization after this energy shock.

Because the reshaping of energy, the dollar, and the manufacturing landscape have become the three important driving forces behind this round of market volatility—and the best handles for investors’ total-amount and structural judgments—Muu Yiling provides three allocation ideas: First recommendation: new and old energy—crude oil, oil shipping, coal, power equipment (lithium batteries, wind/solar, energy storage), and power. Second: after the dollar illusion gradually retreats, the return of commodities’ financial attributes—copper, aluminum, and gold. Third: the re-rating of China’s manufacturing—machinery equipment and chemicals. Continued export performance above expectations and capital inflows returning will also bring new drivers to long-dormant domestic demand—tourism and scenic spots, seasoning and fermentation products, beer and other alcoholic beverages, pharmaceutical distribution, medical aesthetics, etc.

In short, the Middle East conflict that began in late February has become the most important factor affecting global capital markets in March. Its development is destined to be the key variable influencing market trends in the upcoming second quarter.

Finally, let’s briefly look at today’s market highlights.

**　　1. Agriculture sector surges; domestic grain prices stabilize at the bottom and start to rise**

The agriculture sector gained momentum and moved higher during trading on the 30th. Seed industry and grain concept stocks performed strongly. Stocks including Sinong Development, Jingji Zhinuong, Beidahuang, and Jinjian Foods all hit the daily limit, while Qiule Seed Industry rose by more than 8%.

The Middle East regional conflict is also one of the important factors causing volatility in global agricultural supply and demand. The Strait of Hormuz is a key shipping corridor for global fertilizer supply. The shutdown of certain capacities such as Iranian nitrogen fertilizers also affects supply and may push up agricultural planting costs.

Pacific Securities said that from early 2026 to now, domestic grain prices have stabilized at the bottom and are trending upward, with wheat prices leading the gains. Over the same period, overseas grain prices also show an upward trend from the bottom and the increase is relatively significant, mainly due to factors such as rotation-driven price increases in commodities and recent war heat between the U.S., Israel, and Iran leading to higher prices for agricultural inputs like urea. With grain prices rising from the bottom, profits in the grain planting link are expected to see a recovery, and the seed industry—another after-cycle sector—also has the potential to gradually recover. On valuation, the dynamic PE of the grain planting sector is in the bottom range, warranting a “bullish” rating. The dynamic PE of the seed sector is around the historical middle, but with stronger reversal momentum at the industry’s low point in sentiment, it also gets a “bullish” rating. On individual stocks, the planting segment highlights Suqian Nongfa, and the seed segment highlights Denghai Seed Industry, etc.

**　　2. China will build a high-speed rail line under the Yangtze River; high-speed rail concept stocks surge**

On the afternoon of March 30, Shenzhou High-Speed Rail locked the stock price at the limit up in a straight move. China Railway Construction Industrial, CRRC heavy? (tie-in), CIMC? (unclear), Golden Eagle Heavy Industry, China Railway Group, and China Railway Construction all surged.

On the news front, according to CCTV’s midday news on March 29, the world’s largest-diameter high-speed rail tunnel-boring machine “Linghang” independently developed by China successfully completed the construction task for the 11.18 kilometers of the Yangtze River underwater segment, moving one step closer to precisely reaching the “Maintenance Station” at Shaft No. 2. Since it started from Chongming Island in Shanghai on April 29, 2024, “Linghang” has completed safe tunneling for 23 months. It crossed the dike on the south bank of the Yangtze River and successfully “came ashore” in Taicang, Jiangsu. CCTV Finance reported that China will build high-speed rail under the Yangtze River. The total investment of the along-river high-speed rail project exceeds 500 billion yuan, driving value-added growth of nearly 150 billion yuan across upstream and downstream industries.

A report by Huafu Securities shows that in 2021 the State Council issued the “National Comprehensive Three-Dimensional Transportation Network Planning Outline.” Both documents make consistent requirements for the scale of China’s rail network by 2035: by 2035, the national rail network will reach about 200,000 kilometers, including about 70,000 kilometers of high-speed rail. Combining with the “14th Five-Year Plan” rail network scale, to reach the 2035 target, from 2026 to 2035 China needs to build about 35,000 kilometers of railways, including about 20,000 kilometers of high-speed rail. Average annual new rail lines put into operation would be about 3,500 kilometers, including about 2,000 kilometers of high-speed rail. The long-term target of 200,000 kilometers is expected to create broad market space for the rail transit equipment industry.

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责任编辑：常福强