China's Capital Market Supported for Positive Development

Why do global capital see A-shares as a safe haven?

The ongoing tensions in the Middle East have heightened concerns over shipping safety through the Strait of Hormuz, leading to increased volatility in international oil prices. As a result, Asia-Pacific stock markets collectively declined this Monday (March 23), with the Nikkei 225 and Korea Composite Index falling by 3.48% and 6.49%, respectively.

Domestically, the A-share market experienced its most severe correction this year, with the Shanghai Composite Index briefly falling below 3,800 points, and the ChiNext Index dropping over 5% intraday. By the close, the Shanghai Composite, Shenzhen Component, and ChiNext Index declined by 3.63%, 3.76%, and 3.49%, respectively, erasing over 4 trillion yuan in market value within a day. Hong Kong stocks also declined throughout the day, with the Hang Seng Index and Hang Seng Tech Index dropping more than 3%.

In terms of sector performance, coal, oil, and natural gas stocks rose against the trend; while sectors like catering and tourism, precious metals, and airlines saw significant declines.

“China’s energy self-sufficiency rate has reached 85%, far higher than Japan and South Korea’s approximately 15%. This makes A/H shares more resilient under geopolitical spillover effects,” said Liao Jingchi, a strategy analyst at Zheshang Securities. China’s relatively stable energy security and industrial system may serve as a safe haven for global capital, with rising crude oil prices potentially amplifying the vulnerability of Japan and South Korea’s high valuations.

Guotai Haitong Strategy Team analysts noted that, in the short term, external risks have reduced market risk appetite, leading to a synchronized decline in A-shares. However, after the peak of market sentiment, the direction will depend on endogenous logic. The decline in China’s risk-free rate, along with reforms in the capital market and economic restructuring, are fundamental drivers supporting the positive development of China’s capital markets.

Asset Safety Premium Becomes Evident

Since the start of 2026, emerging markets and European stock markets have hit new highs. Meanwhile, the Nasdaq, dominated by technology stocks, has experienced volatility and downward movement, whereas the Dow Jones Industrial Average has reached new highs, driven by cyclical and value stocks. Materials, energy, industrials, and defense sectors generally led gains, while information technology remained weak. Commodities saw metals continue their rally before a correction, and oil prices oscillated upward.

“Global financial markets are experiencing increased volatility, with accelerated rebalancing across countries and sectors,” said Zhang Jundong, macro analyst at China International Capital Corporation (CICC). He explained that historically, during super cycles of commodities, global investment and industrial demand tend to be strong, often benefiting emerging markets. Against the backdrop of new technology and geopolitical narratives driving global capital rebalancing, undervalued and underweighted A-shares may regain favor among global investors.

“Safety has become the most scarce commodity worldwide today. Buying China is essentially buying safety,” said Liu Yuhui, Vice Director of the Shanghai Financial Development Center and a member of the China Chief Economist Forum. He emphasized that this is a sober consensus formed amid global turbulence and a reflection of China’s robust supply chain and large-scale market strength. “This is not just a slogan but an irresistible choice.”

Building Resilience in the Industrial Chain

Geopolitical conflicts have increased uncertainties around traditional energy channels, prompting countries to reassess their industrial chain layouts and accelerate diversification, reliability, and resilience. Countries with complete industrial systems, stable policy environments, and energy independence are becoming key destinations for global capital reallocation.

Lian Tongshan, macro analyst at Caitong Securities, pointed out that in 2026, amid frequent geopolitical risks, the impact of oil shocks is no longer just a simple cost increase but a test of the resilience of global manufacturing supply chains. China’s energy structure grants it greater supply resilience, with nearly 83.2% self-sufficiency in primary energy, significantly higher than major manufacturing economies.

Currently, China has formed a “coal-backed, oil and gas supplemented, non-fossil energy uplift” model. Non-oil and gas energy sources account for over 70%, with domestic coal resources combined with nuclear, wind, and hydropower forming a solid industrial base.

Lian further explained that the recent oil price shocks do not simply translate into negative impacts on exports; the core logic lies in whether “damaged overseas supply is worse than the decline in global demand.” When other economies face shutdowns due to rising energy costs and raw material shortages, China’s complete industrial chain and stable delivery capacity position it to potentially take on global order reallocation.

Foreign Institutions Continue to Increase Holdings

Amidst global geopolitical risks and market volatility, diversification remains a key strategy for overseas investors. The A-share market, with its safety premium and resilience, is attracting more long-term capital.

“There’s a very strong desire to reallocate assets globally. From a global allocation perspective, if you don’t include China’s industrial chain, your global tech layout is incomplete,” said Liu Song, President of Robeco Asia Pacific and Chairman of Robeco Funds.

He further emphasized that China’s market demonstrates a unique “certainty” in a highly volatile global environment, which is a core reason for continued increased investment.

“Based on relatively high economic growth, clear policy direction, sustained macroeconomic improvement, and industrial restructuring driving corporate profit recovery, we remain optimistic about the A-share market this year,” said Jiang Xianwei, senior global market strategist at Morgan Asset Management China.

From a medium- to long-term perspective, Jiang believes that market turbulence caused by geopolitical conflicts is often shorter than economic recessions. He will continue to monitor several areas: first, sectors supported by both domestic policies and overseas demand, such as AI-powered electricity and computing collaboration; second, domestically controlled capital expenditure growth, like domestic computing power and cloud computing; third, the ongoing development of overseas computing supply chains, including optical modules and printed circuit boards; and fourth, future industrial opportunities driven by domestic policy support and supply-demand improvements.