Shanghai Composite Index returns to 3,900 points! Foreign investors are optimistic about Chinese assets, with both defensive and high-growth sectors presenting opportunities.

Interface News reporter | Chen Jing

The capital markets saw a collective surge.

On March 25 at the start of trading, the A-share market showed a pattern of spiking higher then falling back. During the morning session, the Shenzhen Component Index and the ChiNext Index each surged by more than 2% at one point. Judging from the overall market breadth, both markets saw a broadly based advance: the number of stocks rising exceeded 4,500, and overall market sentiment warmed up.

By the midday close, the major indices were steady. The Shanghai Composite Index was at 3,915.49 points, up 0.88%; the Shenzhen Component Index was at 13,721.49 points, up 1.37%; and the ChiNext Index was at 3,292.55 points, up 1.26%. In terms of sector rankings, the power, communication services, and precious metals sectors led the gainers; meanwhile, the oil and gas extraction and services, kitchen and bathroom electrical appliances, and photovoltaic equipment sectors were among the top decliners.

Today, Hong Kong stocks opened higher. The Hang Seng Index was up 0.87%, and the Hang Seng Tech Index was up 0.99%. Then, during the session, both indices swung and dipped; in the afternoon, both major indices surged sharply again.

Regarding the recent short-term pullback seen in the capital markets, multiple domestic Chinese securities firms and overseas institutions actively offered their views.

Goldman Sachs’ Chief China Equity Strategy Analyst Liu Jinzun said on March 24 that, currently, international investors’ attention to Chinese stocks has risen to a near-year peak. Only about 10% of the surveyed clients categorize Chinese equities as being in the “not investable” category; this proportion has fallen significantly from 40% two years ago, showing a notable improvement in market confidence.

In light of the current situation—heightened geopolitical tensions in the Middle East and soaring energy prices—Liu Jinzun stated clearly that Goldman Sachs will continue to maintain an overweight rating on Chinese stocks (covering A-shares and Hong Kong shares). He also believes that in the short term, the Sharpe ratio of A-shares offers greater advantages.

Liu Jinzun further said that, at present, there is still a clear gap between overseas investors’ interest in Chinese stocks and their actual holdings. Looking ahead, the room for allocation increases is broad. Judging from actual holdings data, international investors’ allocation to Chinese stocks remains relatively conservative, and hedge funds’ net exposure to the China market has been hovering around the cyclical midline. However, it is worth noting that long-duration asset managers—especially sovereign wealth funds and pension funds in emerging markets and Belt and Road co-construction countries—have shown strong interest in China’s stock market. For example, amid a gradual recovery in Hong Kong’s IPO market, foreign cornerstone investors’ participation rate has reached a cyclical high of 25%.

CICC told Interface News that this may be a relative mid-term low point for A-shares, and the deep pullback has created a good opportunity to set up positions. While near-term price action is uncertain, after further risk is released due to the adjustment, valuations are in a reasonable range. Looking at the mid term, the macro environment has not undergone fundamental changes, so the logic supporting A-shares to “stay steady and move forward” still holds, and the adjustment may bring opportunities for high-quality allocation.

Yan Xiang, Chief Economist at Founder Securities, said in his latest view that investors should take a rational approach to how external shocks affect the domestic A-share market. In the short term, external disturbances will not change the long-term uptrend for A-shares. After rapid adjustment, the allocation value of equity assets becomes more prominent, which is worth investors’ attention.

West China Securities told Interface News that, with the escalation of the Iran-U.S. conflict and the shifting out of expectations for overseas interest-rate cuts, short-term suppression of global market risk appetite has been layered on top. In contrast, domestic policies are more certain. Regulators have clearly released a signal of “stabilizing the capital market,” and it is worth expecting further stabilizing measures such as “funds for equalization” and optimization of structural tools. In industry allocation, a defensive strategy is relatively dominant in phases. Focus on defensive sectors such as banks, as well as favorable directions like independently controllable energy and AI computing power.

Huobao Securities said that global markets have already priced in the Middle East conflict as a “protracted war,” and risk appetite has fallen. Trump’s repeated signals of cooling and the large differences in U.S.-Iran negotiations still require vigilance. Although A-shares have stronger resilience and are less affected by external shocks, combined with seasonality and external disturbances, there may still be pressure in the short term, volatility increases, and it becomes harder to profit—investors should remain patient.

In terms of investment themes, Liu Jinzun emphasized that “AI is still the most closely watched hotspot in China’s stock market. As a crucial component of the global AI industry, China accounts for 10% of global AI-related market value and 16% of related revenue, but global mutual funds’ allocation to China AI stocks is clearly insufficient. As of January 2026, China AI stocks account for only 1.2% of their global technology stock allocation.”

From Liu Jinzun’s perspective, China has significant competitive advantages and comparative advantages in the global AI supply chain, especially with strong performance in areas such as infrastructure, electricity, and semiconductors. “China’s AI is not a bubble. We expect that the potential economic benefits brought by AI—improving efficiency and creating new profits—could be 50% to 100% higher than the level currently reflected in AI stock prices.”

At the same time, Liu Jinzun still looks favorably on Chinese listed companies that highly value and actively deliver shareholder returns. He predicts that in 2026, cash returns from China’s listed companies may reach record highs again, with an expected scale of about RMB 4 trillion.

For the outlook on the market’s direction, Huobao Securities recommends focusing mainly on broad-based indices that lean toward mid-to-large caps such as the CSI 300. In terms of industry allocation, investors can use a dual mainline strategy to hedge market volatility risks: on one hand, allocate to defensive-leaning directions such as low-volatility dividends; on the other hand, focus on high-cycle sectors in technology hardware (including computing power, power, and semiconductors). In addition, investors can also consider modestly reducing position sizes and holding cash to wait, staying put until a more cost-effective allocation opportunity appears.

CICC also said at the same time that China’s manufacturing advantages are significant. Currently, artificial intelligence is in a stage of technological iteration and application rollout, and training of new models is driving exponential growth in demand for energy and costs. This will support upstream demand and lead to product price increases and improved profitability for related listed companies.

Fu Jingtao at Shenwan Hongyuan said that in the short term, the market will most likely follow a pattern of “oversold—stabilizing policy efforts—rebound.” The market may continue to trade in a range afterward, with leading sectors likely to keep rotating. If a new mainline emerges (such as energy storage and light/optical communications rises based on industry-cycle validation), the market may be able to challenge the upper bound of the trading range.

The Guotai Junan strategy team said that the impact of micro-level trading shocks is expected to be short-lived. At present, it is not advisable to blindly sell off. A-shares are expected to see an important base and a “hitting zone” for setting up positions. Globally, China’s assets are scarce: driven by a stable and safe environment, diversified energy reserves, and growth momentum.

Foreign capital is also optimistic. Morgan Asset Management’s Jiang Xianwei said that in the short term, affected by geopolitical conflicts, A-share allocation focus should be on “HALO” assets—energy, low-level defensive assets (heavy-asset, low-discardability assets)—as well as independently growing sectors. Based on domestic economic performance, policies, macro data, and corporate earnings recovery, he maintains an optimistic outlook for A-shares this year.

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