Shanghai Composite Index narrowly holds above 3,800 points, the long-term bull trend of A-shares remains unchanged

(Source: Beijing Business Today)

After the major index fell below 4,000 points, risk aversion among A-share investors continues to intensify. On March 23, the Shanghai Composite Index initially fell below 3,900 points and continued to decline, briefly dropping below 3,800 points in the afternoon; the Shenzhen Component Index and the ChiNext Index also declined simultaneously. Looking ahead, some experts and institutions believe that the A-share bull market may continue, but the main investment themes will shift somewhat compared to last year. From an industry perspective, leading companies in technology, new energy, and other sectors still hold long-term investment value.

Falling below 3,800 points during trading

On March 23, the three major A-share indices continued to decline. By the close, the Shanghai Composite Index, Shenzhen Component Index, and ChiNext Index fell by 3.63%, 3.76%, and 3.49%, respectively, closing at 3,813.28, 13,345.51, and 3,235.22 points. Sector-wise, oil and gas extraction, coke, and coal mining led gains, while precious metals, under-screen cameras, and sports sectors saw the biggest declines.

In individual stocks, 5,172 A-shares declined, with 133 hitting the daily limit down. Notably, Cambrian (寒武纪) opened lower and continued to fall, with its stock price breaking the 1,000 yuan mark during trading. The stock ultimately closed down 5.24% at 971.3 yuan per share, with a total market value of 409.6 billion yuan. Meanwhile, 305 stocks rose, with 38 hitting the daily limit up.

Looking back to early March, the Shanghai Composite Index once reached a high of 4,197.23 points, approaching 4,200. However, within just 14 trading days, it broke through three hundred-point levels consecutively. The market quickly shifted, with non-ferrous metals leading the decline. Previously hot sectors like high-end manufacturing and AI-related tech stocks also pulled back, as risk aversion increased.

As a result, the net asset value growth rates of public equity funds also dropped sharply, with some products losing up to 20% in a month. Wind data shows that since March, only non-ferrous metal-themed ETFs led the market decline, with Tianhong CSI Industrial Non-Ferrous Metal ETF falling 21.98%. Similar products from Fortune, Wanjia, and Penghua also declined over 21.8%.

According to China Europe Fund, since February, influenced by geopolitical risks, US stagflation, and accelerated AI capital expenditure, global markets have experienced high volatility. The turbulence has significantly reduced leverage in the existing market and accelerated the downward risk in stocks and commodity prices. Geopolitical risks in the Middle East remain uncertain, and increased geopolitical instability could keep global market volatility high. If oil prices stay elevated, global assets may further reduce risk appetite amid concerns about stagflation.

Financial commentator Guo Shiliang also pointed out that the recent rapid decline in A-shares is partly related to complex international factors, especially the recurring Middle East tensions and high oil prices triggering imported inflation. Additionally, the strengthening US dollar index has led to capital outflows from emerging markets. Under a strong dollar environment, asset prices like gold and emerging market stocks have fallen, speeding up global capital flows.

Shift in investment themes

Under external risks, both A-shares and global stock markets have experienced adjustments, and investor sentiment has gradually shifted. However, some experts and institutions remain optimistic about the future of the A-share market. “It is expected that the A-share market in the Year of the Horse will continue this slow and long bull run, with some changes in investment themes compared to last year,” they say. However, Yang Delong, Chief Economist at Qianhai Kaiyuan Fund, told Beijing Business Today that this year will see increased investment difficulty, which he calls a “new dumbbell strategy.”

Specifically, the “dumbbell” still centers on the technology innovation sector, but with differentiation. “Many tech stocks already saw large gains last year, and this year will be about performance verification. Some tech stocks with core competitiveness and breakthrough technologies may continue to rise; those that only hype concepts without real R&D capabilities or performance potential might fall back,” Yang explains.

The other end of the dumbbell involves sectors represented by “HALO assets.” Yang describes “HALO assets” as a focus emphasized recently by Goldman Sachs and Morgan Stanley. The term is an abbreviation of “Heavy Assets” and “Low Obsolescence,” referring to industries unlikely to be eliminated in the AI era.

Guo Shiliang noted that future market movements depend on the effective support at the 3,800 to 3,850-point level. This zone is the starting point of the recent rally since December last year and remains a strong short- to medium-term support. Additionally, whether the strong dollar trend persists needs to be observed, as capital outflows under a strong dollar environment could increase. In the short term, risk-averse assets with low valuation and high dividends may have some defensive advantages. The current market valuation is not high, and further significant declines are relatively limited. Blindly clearing positions is not advisable; patience for a stabilization opportunity is better.

China Europe Fund also believes that, amid rising volatility, the structural market trend may continue, and the value of low-volatility assets is gradually increasing. They suggest focusing on sectors such as traditional low-volatility dividend stocks, especially banks; sectors with significant recent improvement yet not fully priced by the market, like tech storage and optical communications hardware; and cyclical sectors driven by increased risk aversion and rising prices.

Some securities firm investment bankers told Beijing Business Today that, based on global index performance, market panic is rising, and investors should adopt a wait-and-see approach and control their positions in the short term. “However, the long-term trend of A-shares remains unchanged,” they added.