A-share market close: Shanghai Composite Index plunged 3.63%, briefly fell below 3,800 points, ChiNext Index dropped 3.49%, nearly 5,200 stocks declined across the market, with over 100 stocks hitting the daily limit down

How does the escalation of Middle East tensions trigger a chain reaction of declines in the A-shares?

On March 23, the escalation of Middle East tensions caused a collective plunge in global stock markets. The three major A-share indices tumbled sharply today, with all three indices falling over 4% at one point during the session. By the close, the Shanghai Composite Index dropped 3.63% to 3,813.28 points, the Shenzhen Component Index fell 3.76% to 13,345.51 points, and the ChiNext Index declined 3.49% to 3,235.22 points. The STAR Market 50 Index decreased 4.31% to 1,261.44 points. The total market turnover was 2.45 trillion yuan, nearly 5,200 stocks declined, over 100 stocks hit the daily limit down, and only about 300 stocks rose.

In the market, spot gold plummeted below $4,300, ending the year with zero gains. The precious metals sector plunged, with Chifeng Gold, Sichuan Gold, and Shenda Resources hitting the daily limit down. The tourism and hotel sector declined, with Lijiang Shares and Guilin Tourism hitting the limit down. LED and MiniLED sectors collectively fell, with Sanan Optoelectronics hitting the limit down. Sportswear and cosmetics sectors declined, with Toread dropping nearly 11%. Aquaculture and feed sectors weakened, with Tianma Technology hitting the limit down. Leading declines were also seen in PCB, component, micro-cap stocks, and mixed reality sectors. Additionally, rising tensions in the Middle East kept oil prices high, boosting oil, gas, and coal sectors, with YunCoal Energy and Liaoning Energy hitting the daily limit up. Power stocks strengthened, with Dongfang New Energy hitting the limit up. A few sectors, such as helium, silicon materials, and wafers, recorded gains.

Hot Sectors

The coal sector was the day’s “countertrend hero,” with YunCoal Energy, Shanxi Coking Coal, and Liaoning Energy strongly hitting the daily limit.

CITIC Securities’ research report pointed out that the ongoing Middle East geopolitical conflict has lasted over three weeks, and international oil and gas prices have continued to rise steadily. Despite short-term demand slowdown for thermal coal, chemical coal consumption may continue to support coal prices, leading to a rebound after declines. The short-term demand for coking coal has also improved, and with overseas factors supporting, domestic coal prices are expected to rise further and sustain gains, making the sector worth watching.

Oil and gas stocks also rose, with Bomin Tech hitting the daily limit. The space photovoltaic concept sector was active, with Huamin Shares and Zhongli Group hitting the limit up, followed by Dongfang Risheng, GCL System Integration, and Maiwei Shares.

On the news front, Tesla’s self-built chip factory “Terafab” project is about to start. Elon Musk revealed that the project aims to produce over 1 terawatt of computing power annually, with about 80% for space applications and 20% for ground use, operated jointly by Tesla and SpaceX, adding imagination space for space-based photovoltaic concepts.

Electric power stocks repeatedly gained strength, with Huadian Liaoning Energy and Dongfang New Energy hitting the limit up; power grid equipment stocks rose, with Sanyuan Technology reaching the daily limit; chemical stocks fluctuated and rebounded, with Jinneng Technology hitting the limit; robotics concept stocks showed partial strength, with Jinfan Technology and Zhongda Lide hitting the limit. Additionally, lithium mining and new energy vehicle sectors also performed well.

The precious metals sector oscillated downward, with Chifeng Gold hitting the limit down in a straight line, Shan Jin International falling over 8%, and China Gold, Shandong Gold, and Western Gold also declining.

The reason is that on March 23, international spot gold markets continued last week’s volatile trend. London gold prices sharply fell during trading, breaking below the key support level of $4,400 per ounce, marking the longest consecutive decline since October 2023. The traditional safe-haven logic in the market temporarily failed, triggering a chain reaction of reallocation of funds.

All hardware-related stocks, including optical modules and high-speed copper cables, declined significantly, with Sanan Optoelectronics hitting the limit down. Semiconductor chip industry chain stocks were weaker, with Goke Micro and Jucheng Shares falling over 7%. The tourism and hotel sector fluctuated and declined, with China Three Gorges Tourism, Guilin Tourism, and Emei Mountain A dropping over 7%. Agriculture and aquaculture concepts also declined, with Muyuan Foods and Zhongxing Microbial falling over 7%. Additionally, insurance, beauty, and aviation sectors performed poorly.

Institutional Views

CITIC Securities believes that many core debates about the impact of Middle East conflicts will be answered gradually after April. Until then, the market will be in a narrative game phase, reflecting liquidity withdrawal characteristics. It recommends focusing on China’s advantageous manufacturing sectors with valuation weightings, with a core position in new energy, chemicals, electrical equipment, and non-ferrous metals.

Huaxi Securities pointed out that last week, most global stock markets declined, with A-shares and European markets leading the fall. Uncertainty in US-Iran geopolitical tensions and the hawkish stance in Federal Reserve statements suppressed risk appetite. The A-share market retreated, trading volume shrank, and investor sentiment cooled. Defensive sectors like food and beverages, banking, as well as high-growth sectors like storage and AI computing power, performed relatively better.

HuaAn Securities noted that rising US-EU tariffs risks, unresolved US-Iran tensions, inflation concerns leading to a hawkish Fed, and low probability of new domestic policies suggest the market will remain weak and volatile. Short-term, assets with dividend yields and sectors with price increase catalysts are expected to perform better. Growth style remains the mid-term main theme, and current adjustments are seen as healthy.