Shanghai Index Barely Holds 4000 Points, Nearly 5000 Stocks Declining! Where Will the Market Go from Here?

The escalation of the Iran-U.S. conflict has triggered turbulence in global markets. On March 19, the A-shares opened lower and declined further, with trading volume slightly expanding to 2.13 trillion yuan, reflecting a clear risk-averse sentiment. In terms of sectors, non-ferrous metals and other resource stocks led the declines, while military, electronics, and other tech stocks also fell sharply. Conversely, dividend-paying stocks performed relatively well, with coal and oil sectors providing support.

Analysts note that current market concerns have shifted from purely military confrontation to risks of “economic strangulation.” Additionally, the Shanghai Composite Index above 4,000 points is congested with a large amount of trapped and profit-taking positions from earlier periods. Under external negative shocks, profit-taking and stop-loss sales have concentrated, further amplifying market volatility.

Looking ahead, the short-term outlook suggests that A-shares may enter a phase of oscillation and bottoming out, and investors should avoid panic selling. It is recommended to adopt a “defensive with moderate speculation” strategy, maintain flexible positions, and buy quality tech stocks on dips.

Resource stocks, such as non-ferrous metals, plunged significantly.

In terms index performance, the Shanghai Composite briefly broke below 4,000 points during the session but managed to recover slightly at the close, ending down 1.39% at 4006.55 points; the ChiNext Index fell 1.11% to 3,309.1; the Shenzhen Component declined 2.02%. The Sci-Tech Innovation Board 50 dropped 2.44%, the Beijing 50 fell 3.33%, the SSE 50 declined 1.53%, and the CSI 300 decreased 1.61%.

Trading volume increased slightly by 66.25 billion yuan, with total daily turnover across the three markets reaching 2.13 trillion yuan. The market has been volatile recently, with leverage funds remaining above 2.6 trillion yuan. As of March 18, the margin balance in Shanghai, Shenzhen, and Beijing markets was 2.65 trillion yuan.

On the sector front, precious metals, rare earth permanent magnets, fertilizers, pesticides, and phosphate chemicals tumbled, while oil and natural gas, banking, oil and gas resources, shale gas, coal, and telecom operators defied the trend and rose.

Market losses were evident, with 4,955 stocks declining and 14 hitting the daily limit down; 505 stocks gained, with 36 hitting the limit up. Among active stocks, Zijin Mining fell over 7%, Bawei Storage dropped nearly 6%, Shulian Electronics retreated over 5%, and Goldwind Technology declined nearly 4%.

Only coal, oil and petrochemicals, and utilities sectors gained, while 26 first-level industries in Shenwan’s classification declined more than 1%. Banking and telecom sectors saw slight declines.

Recently, resource stocks have “fired out,” with significant declines today. The non-ferrous metals sector fell over 6%, with steel and basic chemicals also plunging. Tech stocks in machinery, defense, and electronics also experienced notable declines.

Gushang Fund researcher Bi Mengran analyzed that the collective decline of resource stocks such as non-ferrous metals, steel, and chemicals today was mainly driven by three factors:

First, the pressure transmitted through futures markets. Last night, global commodity markets plunged collectively, with COMEX gold and silver futures falling sharply, and industrial metals like copper in Shanghai and London also declining. Domestic futures followed suit, directly suppressing resource stocks in A-shares, especially in precious and industrial metals, with futures price linkages being most evident.

Second, a reversal in macro logic. The hawkish stance of the Federal Reserve cooled expectations of rate cuts, with the narrative of “higher interest rates for longer” dominating the market. The opportunity cost of holding zero-yield commodities like gold and copper surged, severely damaging valuation logic. This was the core driver behind resource stock declines.

Third, profit-taking and capital diversion. Since the start of the year, leading resource stocks had accumulated substantial gains, resulting in profit-taking. Under external negative catalysts, funds concentrated on cashing out profits, leading to a “stampede” of selling. Meanwhile, active funds are highly concentrated in the tech growth theme, making resource stocks less attractive for incremental capital and lacking momentum to rise, which makes their prices more prone to decline.

External shocks plus internal capital battles

Despite some resilience in the A-share market amid the Iran-U.S. conflict, today’s sharp decline, with the Shanghai Index briefly falling below 4,000 points, sent a more cautious signal to the market. Considering the trading volume, how should we interpret the today’s open-low-close pattern?

Sui Dong, a researcher at PaiPai.com, told the “International Financial News” that the main external reason for the sharp drop is the Fed’s hawkish signals tightening global liquidity, combined with Middle East tensions pushing up oil prices and raising input inflation concerns. Internally, profit-taking from accumulated gains at key psychological levels triggered technical selling. From the volume perspective, although some funds absorbed the decline, most were engaged in intense “high-low switching,” with insufficient new capital entering, indicating a passive turnover under stockpile competition.

Li Shiyu, a fund manager at Xiaoyu Investment, also analyzed that since March, the A-share market has maintained a range-bound adjustment. The impact of the Iran-U.S. conflict should be gradually weakening. However, last night’s escalation has rekindled fears of an energy crisis—rising oil prices could trigger global inflation and further dampen Fed rate cut expectations. In other words, the Iran-U.S. dispute has transcended military confrontation and escalated into an “economic strangulation.”

“The core reason for the A-share plunge can be summarized as external shocks and internal capital battles,” Bi Mengran pointed out. On the external side, three major negative factors are fermenting simultaneously: First, hawkish signals from the Fed continue, with the rate unchanged at the meeting and the dot plot indicating only one rate cut in 2026—far beyond market expectations. This has heightened expectations of tightening global liquidity, with U.S. bond yields rising and the dollar strengthening, directly pressuring valuation of risk assets in A-shares, especially those heavily held by foreign investors. Second, geopolitical tensions in the Middle East escalated, with Iran’s South Pars gas field attacked, threatening energy infrastructure and causing a sharp rise in international oil prices—Brent crude surpassed $103 per barrel. Concerns over input costs increased, further suppressing risk appetite. Third, overseas markets declined in tandem, with U.S. major indices falling overnight, and Asia-Pacific markets weakening simultaneously, transmitting pessimism to A-shares, which opened lower and remained subdued throughout the day. Internally, the selling pressure from funds was the key driver of the decline.

Bi Mengran stated that a large amount of trapped and profit-taking positions accumulated above 4,000 points, and the index repeatedly oscillated around this level for days without effective breakout. Market patience is waning, and under external negative stimuli, profit-taking and stop-loss sales have concentrated, adding to downward pressure and causing a broad decline. Currently, risk aversion dominates the market sentiment.

High volatility and rapid rotation expected in the short term

Affected by geopolitical tensions, the current A-share market shows obvious emotional swings, with external uncertainties persisting. As earnings season approaches, what risks should investors watch for? How will the short-term trend develop?

“Considering the current environment, capital flows, and the degree of negative news absorption, A-shares are unlikely to see a strong reversal in the short term. The main trend will be oscillation and bottoming, with pressure gradually digested. The 4,000-point level is a key psychological threshold, around which the market is likely to fluctuate repeatedly,” Bi Mengran said. The core principle for short-term positioning is to keep positions light, focus on risk avoidance, and avoid bottom-fishing blindly.

Sui Dong believes that in the near term, A-shares are expected to enter a phase of oscillation and stabilization. The Shanghai Index has technical support near 4,000 points, but due to insufficient incremental funds and low market sentiment, the rebound momentum is limited, likely leading to repeated consolidation within a range to solidify the bottom.

Hua Hui Chuangfu’s General Manager Yuan Huaming also predicts that A-shares are more likely to show a slow, oscillating upward trend in the short term. He noted that while the turning point has not yet arrived, it is approaching. Key signals include trading volume and whether a clear main theme emerges; if only sector rotation occurs, large-scale rallies are unlikely. Current volume reflects cautious sentiment, and the chance for a broad rise is limited. However, with ample liquidity and policy support, the market still has strong bottom support and some upward potential.

“Short-term, A-shares will continue to exhibit high volatility and rapid rotation,” said Pan Jun, a portfolio manager at Naile Fund. He pointed out that geopolitical events like the Iran-U.S. conflict are short-term disturbances that, through risk aversion, may cause brief fluctuations and sector divergence, but the overall downside space is limited. Additionally, with earnings season approaching, the market is shifting from valuation repair to performance verification, with stricter profit realization requirements. The logic is moving from liquidity and sentiment-driven single-sided growth to a focus on fundamentals, leading to oscillation and correction.

“A-shares are showing signs of breaking down, indicating a possible transition into a mid-term correction,” Li Shiyu said. “Due to the influence of large-cap stocks, the Shanghai Index’s reference significance is limited; we have always used the Shenzhen Component as a key indicator. The Shenzhen Index has repeatedly tested the 60-day moving average without breaking below, so the trend is still ongoing. If within 3 to 5 trading days the closing price cannot regain the 60-day moving average, the market will likely confirm a mid-term correction, meaning the index needs to find support levels downward.”

Shangyi Fund’s General Manager Wang Zheng analyzed that recent market movements have been affected by external geopolitical tensions, overseas policy uncertainties, and domestic earnings windows, with a clear stockpile game characteristic and overall weak risk appetite. Funds are reluctant to hold onto a single theme long-term due to uncertainty, switching quickly among tech, cyclical, and defensive sectors; meanwhile, policy measures are numerous but lack a strong main line, further accelerating hot-spot shifts and sector rotation.

Looking ahead, Wang Zheng believes the short-term market will mainly oscillate and bottom out with some structural differentiation. The downside is limited, but external shocks and earnings releases will continue to cause volatility. In the medium term, the driving logic will shift from sentiment and themes to a dual-driven approach of “performance + policy,” with structural opportunities remaining the core feature.

Maintain flexible positions

In a volatile environment, how should investors manage their holdings?

Li Shiyu recommends controlling positions appropriately, reducing holdings if overly heavy, as signs of a mid-term correction are emerging. He explained that today’s sharp declines in resource stocks like non-ferrous metals are mainly due to the Fed’s further cooling of rate cut expectations, with markets now trading on “rate hikes to curb inflation.” In the short term, non-war-related tech stocks and war-related resource stocks (oil, chemicals) are playing a “see-saw” game; if the market confirms a mid-term correction, strong sectors will eventually “catch down.” Therefore, investors should focus on position management and wait for market signals of recovery.

“Given the current environment of ‘top (geopolitical suppression) and bottom (policy support)’ in volatility, a ‘dumbbell’ position strategy is recommended—balancing defense and offense, avoiding chasing highs and selling lows. Maintain a neutral to slightly bullish stance, use market dips for low-cost accumulation rather than panic selling,” Pan Jun advised. He noted that tech stocks benefited last year from the global AI revolution and domestic self-reliance policies, accumulating large gains. Short-term risk aversion has led to profit-taking, while resource stocks like coal and petrochemicals, benefiting from geopolitical supply shocks, have seen rising costs and risk premiums.

Sui Dong suggests adopting a “defensive with moderate speculation” approach. The primary focus should be on controlling overall positions and maintaining flexibility. Allocate mainly to high-dividend defensive sectors like oil and coal as the core holdings, avoiding high-priced stocks. At the same time, consider light positions in tech sectors such as communications and computing, which have already adjusted and are reasonably valued, for phased low-cost entry.

“Multiple factors are resonating, and capital may rotate between tech and resource sectors,” Yuan Huaming said. Tech stocks have strong growth potential but are volatile and sensitive to sentiment, suitable for aggressive allocation. Resource stocks are mainly driven by commodity prices and supply-demand cycles, with stable operations and dividends, making them good defensive assets. Currently, market rotation favors balanced allocations of tech and resources, adjusting proportions dynamically—raising tech weights when risk appetite improves, increasing resource weights when risk aversion rises.

Bi Mengran advises avoiding full positions and reserving funds for future oscillations, to prevent panic selling. She pointed out that resource stocks still face multiple negative factors that have not been fully digested, likely continuing to oscillate, with some high-volatility stocks still vulnerable to correction. She recommends staying on the sidelines temporarily, avoiding bottom-fishing, and waiting for signals such as shrinking trading volumes, stabilization of futures prices, and marginal improvement in Fed policy expectations before deploying into fundamentally strong, reasonably valued leaders. For tech stocks, short-term fluctuations are expected, but long-term support remains. It is advisable to buy quality stocks on dips, focusing on sectors with “policy support + demand explosion” and clear growth logic. In the consumer sector, catalysts are weaker in the short term, but domestic consumption data still has room for improvement, and some leading segments may still have opportunities.

Wang Zheng also recommends a balanced approach: using low-valuation sectors as defensive bases; opportunistically increasing exposure to AI computing power, semiconductors, and new productivity directions like computing and energy collaboration; and moderately combining consumer and healthcare sectors for smoother volatility management. Maintain controlled positions, avoid chasing highs, and focus on low-cost accumulation.

Reporter: Zhu Denghua