Will the Shanghai Composite Index rebound in April after falling 6% in March?

On March 31st, the A-shares opened higher and then declined, with trading volume increasing to over 20 trillion yuan. The market showed a clear loss-making effect, with nearly 4,400 stocks drifting into the red, led by coal, electric power equipment, electronics, and chemicals. Looking back at March, over 22 trading days, the Shanghai Composite Index fell more than 6%, and the ChiNext Index declined nearly 4%.

Interviewees pointed out that it is unlikely for the A-shares to experience a trend reversal in April, and the market may continue to fluctuate and grind sideways until mid-month. It is necessary to wait for the dissipation of capital disturbances, clearer earnings expectations, and easing external pressures before stabilizing. Currently, the core principle should be “controlling positions first and prioritizing certainty,” avoiding blindly bottom-fishing on themes without earnings support, and avoiding risks of earnings shocks.

4378 stocks closed lower

On the last trading day of March, the A-shares opened higher and then declined, with the Shanghai Composite down 0.8% at 3891.86 points, the ChiNext Index down 2.7% at 3184.95 points, and the Shenzhen Component Index down 1.81%. The declines of the CSI 300, SSE 50, and SZSE 50 were all less than 1%, but the STAR 50 fell 2.59%.

In terms of volume, market turnover increased by 78.34 billion yuan from the previous trading day, reaching 2.01 trillion yuan. Regarding leverage funds, as of March 30th, the margin financing and securities lending balances in Shanghai, Shenzhen, and Beijing markets increased compared to the previous day, rising to 2.62 trillion yuan.

On the market, stocks with dividend yields above net asset value, banks, consumer electronics, white goods, and transportation equipment rose, but semiconductor, coal, power supply equipment, electronic manufacturing equipment, and storage chips plunged.

Among the 31 first-level industries in Shenwan, household appliances performed well, with banks and food & beverages providing support. The remaining sectors declined, with 18 sectors falling more than 1%.

Coal and electric power equipment sectors declined over 3%, while electronics, basic chemicals, petroleum and petrochemicals, communications, and utilities also fell sharply.

A total of 4,378 stocks declined, with 17 hitting the daily limit down; 1,011 stocks rose, with 59 hitting the daily limit up. Among active stocks, five had daily trading volumes exceeding 10 billion yuan, with Zhongji Xuchuang and Xinyi Sheng both dropping over 3%, Zhaoyi Innovation nearly 7%, CATL nearly 3% lower, and Foxconn Technology up over 4%.

Why did it open high and then fall?

How to view today’s A-share performance?

Hang Seng Qianhai Fund Manager Hu Qicong analyzed that today’s A-share market continued its oscillating adjustment, with the Shanghai Composite opening slightly higher in the morning, attempting a rebound in the afternoon but lacking follow-through, and accelerating to decline at the close. Overall, it showed a pattern of high opening and low closing, highlighting short-term market weakness. From the current market structure, the large caps are still oscillating in the process of bottoming out, with resistance from moving averages above and weak rebound momentum; below, valuation support exists, but panic sentiment may still trigger a correction. On the international front, the evolving Middle East geopolitical conflict remains highly uncertain, coupled with global liquidity tightening driven by rising inflation expectations, so short-term A-share trends are likely to be dominated by sideways digestion.

“From volume and price perspectives, the market shows a negative structure of increased volume with stagnating gains. The lack of incremental funds supporting the rise, and the release of selling pressure during declines as trading volume expands, with a clear divergence between large-cap support and sector exits, confirms the weak foundation of the rally under stockpile competition,” Liu Yan, Chairman of Anjue Asset, told the International Financial News. He explained that today’s high open and subsequent decline are the result of multiple internal and external factors resonating, leading to increased market divergence. The early morning surge was driven by expectations of domestic economic recovery and policy support from long-term funds, combined with short-term oversold rebound momentum after previous adjustments. The core reasons for the retreat include: the significant uncertainty caused by the US-Iran conflict suppressing global risk appetite, end-of-quarter fund assessments leading to concentrated profit-taking, and the lack of volume support causing a feedback loop of decline amid trapped positions.

“Current market sentiment is in a secondary retreat after failed recovery, dominated by risk aversion, with weak profit-taking effects, and funds shifting to defensive sectors, creating a strong wait-and-see atmosphere,” Liu Yan analyzed. He noted that sectors today showed extreme divergence, with defensive sectors leading and growth sectors being hit hard, especially with the Shanghai market outperforming the Shenzhen market. Large-cap weights like banks and insurance are supporting the Shanghai Index against the trend but cannot hide the overall market decline. Risk-averse sentiment dominates, with funds clustering in undervalued, high-certainty defensive sectors like liquor, food & beverages, and pharmaceuticals, which performed countercyclically. Hot growth sectors such as AI computing power, semiconductors, and new energy suffered sharp declines, while cyclical sectors like coal and non-ferrous metals also weakened, leading the declines. Massive capital withdrawal and the lack of a sustained offensive theme have resulted in extremely low profit-making effects.

No signs of a trend reversal expected

How will the A-shares perform in April? What risks should be watched?

“Market is likely to continue oscillating and bottoming until mid-April, waiting for the dissipation of capital disturbances, clearer earnings expectations, and easing external pressures for stabilization,” Liu Yan said. He believes that a trend reversal is unlikely in April, as global liquidity constraints and the weak domestic recovery pattern remain unchanged. However, policy support and valuation floors are clear, with limited downside space. As the first-quarter earnings season begins, structural opportunities will gradually increase.

“Expect continued sideways movement in April. Once the end-of-quarter capital pressures ease, first-quarter earnings are gradually reported, and geopolitical conflicts subside, the market will gain clearer direction,” Zhu Runkang, product manager at PaiPaiNet Wealth Public Offering, told reporters. He noted that current market sentiment is cautious, with weak profit-taking effects. Although trading volume has exceeded 20 trillion yuan, this does not indicate new capital inflows but rather quarter-end rebalancing, so a comprehensive market reversal is unlikely in the short term. The market is expected to maintain a structural pattern with index fluctuations within a range. Despite some signs of economic recovery, external geopolitical disturbances and low enthusiasm for capital entry limit significant upward movement.

“The evolution of geopolitical tensions remains highly uncertain in the short term, and the equity market may continue to exhibit high volatility. From a qualitative perspective, the market has already priced in pessimistic expectations of rising interest rate midpoints, likely entering the latter part of the adjustment cycle,” Furuang Fund stated. The ongoing US-Iran conflict continues to dominate market sentiment. Judging by the duration and intensity of the conflict, it has significantly exceeded previous optimistic expectations. The market’s pricing logic for geopolitical risks is shifting from “short-term shock negative” to “medium-term rising interest rate expectations.”

How to position your portfolio?

Affected by international tensions and profit-taking pressures, the entire March saw a decline in A-shares, with investors experiencing a clear loss effect. As April approaches, how should investors manage their positions based on current A-share performance? How to allocate sectors during earnings disclosure periods?

Zhu Runkang believes that future opportunities will focus on segments with earnings growth and policy catalysts. He recommends a “risk-avoidance + certainty in earnings” approach, with particular attention to innovative drugs, cyclical resources, and high-dividend blue chips.

“Positioning should adhere to the core principle of ‘controlling positions first and prioritizing certainty,’ strictly avoiding full leverage,” Liu Yan advised. He suggests that conservative investors keep total positions at 30-40%, balanced investors maintain around 50%, and aggressive investors do not exceed 60%, with sufficient cash reserves to handle volatility. The portfolio should adopt a “dumbbell” structure: over 70% of holdings anchored on earnings certainty in the first quarter, focusing on consumer staples, high-dividend stocks, and defensive core positions; use no more than 30% to seek opportunities in growth leaders that have been overly beaten down but have earnings support. Strictly follow operational discipline, avoid blindly bottom-fishing on themes without earnings support, and steer clear of earnings shock risks.

Furuang Fund states that although tail risks (such as panic declines) may still cause temporary market disturbances, from a strategic allocation perspective, the current stage is critical for uncovering opportunities. Patience is recommended, with a focus on key sectors such as AI computing and applications, semiconductors, and new energy, as well as sectors benefiting from price increases like non-ferrous metals and new energy.