A-shares break out of an independent trend, with two main themes attracting funds against the trend

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Reporter丨Yi Yunjun

Editor丨Zhang Xing

Since March, amid the standoff in the Middle East, global stock markets have seen intense volatility, while China’s A-share market has shown relatively strong resilience.

Especially within the Asia-Pacific market, A-shares have carved out an “independent trend.” According to Wind data, as of March 30, the Korea Composite Index and the Nikkei 225 Index had fallen 15.5% and 11.8%, respectively, since March 2; over the same period, the Shanghai Composite Index retreated 5.7%, while the ChiNext Index fell by more than 1%.

Looking ahead to the rest of the market, the strategy team at CICC believes that although there is still uncertainty in the short term and risk appetite is unlikely to rebound fundamentally before the situation becomes clearer, the mid-term logic supporting A-shares’ “steady advance” still holds.

For A-share positioning in the second quarter, some institutions suggest that investors should shift from an overweight, offense-style combination of technology and cyclicals back to a balanced “dumbbell” style, and increase holdings in a dividend-focused style.

Resilience stands out

Against the backdrop of highlighted market resilience, A-share industry sectors have continued to diverge.

According to Wind data, from March 2 to March 30, the coal, utilities, banking, communications, and power equipment indices rose by 4.9%, 3.5%, 3.2%, 1.2%, and 0.7%, respectively, ranking in the top five among the gain lists for single-industry-level indices under Shenwan.

Meanwhile, over the same period, other Shenwan first-level industry indices all showed a downtrend. Among them, those that had accumulated larger gains earlier—nonferrous metals and defense and military industry—saw relatively large pullbacks, with losses of 15% or more across the interval. The media, steel, computer, and machinery & equipment indices also performed weakly, with declines exceeding 12%.

In its latest research report, CICC’s strategy research team pointed out that since the conflict broke out on February 28, China’s A-share market has mainly revolved around two main lines: “defensive hedging” and “energy substitution.” Utilities and banking are typical defensive sectors, while coal, power, batteries, and energy storage—benefiting from the energy substitution logic—have received support.

By contrast, for the oil and gas industry chain directly related sectors—such as petroleum and petrochemicals and basic chemicals—volatility has intensified due to short-term game-of-news dynamics and concerns about long-term demand, increasing the difficulty of positioning.

Worth noting is that last week (March 23–27), affected by changes in the Middle East situation, investor caution and wait-and-see sentiment increased, and the market moved into a stage of contention within existing holdings, with sector rotation noticeably accelerating.

On March 30, A-shares continued a choppy trading pattern. Nonferrous metals strengthened, while the power sector plunged. The Shanghai Composite Index closed up 0.24% at 3923.29 points. The Shenzhen Component Index fell 0.25%, the ChiNext Index declined 0.68%, and the STAR 50 Index dropped by more than 0.8%.

At present, institutions are not pessimistic about A-shares’ outlook.

“Bad pricing for the A-share market regarding the Middle East conflict may have already reached the bottom range. Going forward, A-shares may form a pattern of consolidation and differentiation.” Jin Eagle Fund sources told the reporter.

However, the source also said that it is still necessary to watch the progress of the Middle East situation—especially if the period of high oil prices is extended to more than 1–2 quarters, expectations for the macro fundamentals would deteriorate further compared with current judgments. Tail risks arising from the conflict still need to be guarded against, but assuming the revision of expectations needs to be adjusted step by step as events unfold, it is not advisable to amplify concerns about the conflict when the market is panicking.

Specifically at the industrial level, considering the degree of overall impact and industry-chain linkage, CICC’s research team believes that the most prominent domestic impact of this round of conflict is still concentrated in the crude oil segment.

“Geopolitical conflict mainly affects A-share valuation in the short term through risk appetite and inflation expectations. In the medium term, what is more worth focusing on is how rising energy and transportation costs are transmitted into companies’ income statements,” said CICC’s strategy research team.

From a medium-to-long-term perspective, CICC’s strategy research team believes that energy security and independently controllable industrial chains may become the main lines. Strategic resources such as oil and gas and rare metals have long-term demand stickiness; penetration rates in areas such as grid equipment, energy storage, and wind power are expected to accelerate further, amplifying China’s competitive advantage in exporting new energy.

CICC’s strategy team believes that although there is still uncertainty in the short term and risk appetite is unlikely to rebound fundamentally before the situation becomes clear, the logic supporting A-shares’ “steady advance” in the medium term still holds.

Capturing four major directions

Looking to the second quarter, what investment opportunities does the A-share market have?

Nomura Oriental International Securities analysts Song Jin and Gao Ting recommend that investors shift from an over-weight offensive combination of technology and cyclicals back to a balanced dumbbell style, increasing holdings in a dividend-focused style.

“However, because the value-and-dividend style currently does not offer overall valuation-for-value attractiveness compared with the growth style, we suggest concentrating on three industries: banks (low volatility and high ROE dividends), petroleum and petrochemicals (fundamentals and event-driven dividend), and home appliances (fundamentals dividends). In addition, within overseas expansion upgrades and growth segments, we prioritize the power equipment sector.” They said.

On the industry allocation front, Zhejiang Securities’ strategy team recommends focusing on four directions:

First, the strong will keep strengthening among new driving forces. Focus on power equipment (solar PV, wind power, and lithium batteries) that benefits from “power-and-computation coordination” and supply clearing.

Second, under the HALO trading backdrop, traditional industries are expected to undergo a value re-rating. From the “heavy-asset” dimension, focus on power, communications services, fiberglass, pig-iron and steel products, coke, piped gas, and coal mining; from the “high barriers” dimension, focus on communications services, power, and grid equipment.

Third, the diffusion within cyclicals: focus on basic chemicals and agriculture, forestry, animal husbandry and fisheries that have lagged in terms of gains.

Fourth, within the consumer goods sub-sectors, for example, sectors with multiple catalysts in the second quarter such as healthcare and life sciences (innovative drugs) as business conditions improve, and consumer services with broad space supported by policy and higher service-consumption share.

At the same time, the team also recommends focusing on theme investment opportunities related to OpenClaw’s AI agents, embodied intelligence, solid-state batteries, and more.

For April, some institutions recommend combining listed companies’ first-quarter reports to look for investment clues.

Minsheng Jiayin Fund states that in April, listed companies will enter a period of intensive disclosure of annual reports and first-quarter report results. It is expected that the sub-sectors where first-quarter performance can keep growing strongly or improve mainly include price-increase chains, manufacturing with export advantages, and TMT price-spread areas. Overall, the April market is expected to see a rebound with consolidation; watch for industry themes aligned with improving conditions around a mild rebound in inflation and the first-quarter performance presentations.

The research team at Everbright Securities mentioned that in April, listed companies’ 2025 annual reports and their 2026 first-quarter reports will be released one after another. Based on the current situation, listed companies’ overall performance is expected to improve slightly. Structurally, the STAR Market/tech categories and cyclical categories also have standout highlights, and an improvement in fundamentals beyond expectations is likely to support an upward move in the market.

“Since the outbreak of conflicts among the U.S., Israel, and Iran, industry performance differences have been significant, and the adjustment has been most obvious in two types of industries. One is growth-related directions that were at high levels earlier. The other is resource sectors whose product prices have been notably affected. If the market reverses in the future, these two types of industries may perform better.” The Everbright Securities research team analyzed.

At the same time, the team recommends focusing on industries that are likely to benefit from rising commodity prices, including resource sectors, essential consumption, hard technology, and directions related to government investment. In addition, industries with high growth rates in annual reports and first-quarter reports are also worth prioritizing, and may mainly be concentrated in resource sectors and technology-related sectors.

(Disclaimer: The content of this article is for reference only and does not constitute investment advice. Investors act at their own risk.)

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