Baijiu Rises, Resource Stocks "Cool Down"! How Should A-Shares Be Positioned?

On March 16, A-shares experienced intraday gains, but trading volume slightly contracted, indicating a game of stockpile funds and a clear wait-and-see sentiment. The market saw electronics and liquor sectors lead the rally, while coal, steel, non-ferrous metals, chemicals, and other resource stocks declined across the board.

Sources indicate that the A-share market exhibits a “high-low switching” structural characteristic. Although resource sectors pulled back due to short-term profit-taking, the mid-term logic for some varieties remains unchanged. In the short term, clear signs of stabilization are still needed, and it is recommended to stay observant and avoid rushing into positions. Meanwhile, focus can be placed on industry trend-supported leading stocks such as AI+ and semiconductors, with phased left-side positioning.

Storage Chip Sector Surges

After a dip in the morning, A-shares rebounded in the afternoon. Shenzhen market outperformed Shanghai, with individual stocks showing mixed gains and losses. The Shanghai Composite Index slightly declined by 0.26% to 4,084.79 points, while the ChiNext Index rose by 1.41% to 3,357.02 points. The Shenzhen Component Index showed a slight increase. The STAR Market 50 and CSI 300 indices were marginally red, while the SSE 50 and CSI 50 declined slightly.

Market sentiment remains cautious, with total daily turnover shrinking to 77.39 billion yuan, and overall market turnover dropping to 2.34 trillion yuan. As of March 13, the margin balance in the Shanghai, Shenzhen, and Beijing markets was 2.65 trillion yuan.

The market continued to show sector differentiation. Over the past two days, the liquor and beverage sectors led gains, while resource stocks cooled off. Chemical raw materials, gold concepts, base metals, and steel sectors saw significant declines. Today, storage chips surged, with semiconductor, electronic components, and automotive chips performing well.

Market profitability remains limited. Throughout the day, 2,843 stocks closed higher, with 60 hitting the daily limit-up; 2,494 stocks declined, with 10 hitting the limit-down. Sixty stocks traded over 10 billion yuan in daily turnover, including New EasySun (+5%), Zhongji Xuchuang (+4%), while Tianfutong declined over 4%. Power equipment stocks saw mixed performance: CATL rose nearly 3%, while Sungrow Power Supply declined. China Power Construction hit the limit down, and China Energy Construction fell more than 8%.

Among the 31 first-level sectors in the Shenwan classification, 17 closed in the red. Consumer sectors such as food and beverages, retail, and beauty care led the gains, with electronics also performing well. Communications, computing, and defense sectors showed slight gains.

Nine electronics stocks hit the daily limit, with Yachuang Electronics hitting the limit-up. Baiwei Storage, Benchuang Intelligent, Huahong Company, Yihou New Materials, and Guoke Micro all gained over 10%. Victory Precision, Jinan Guoji, Shenhua Development A, Chaoying Electronics, and Demingli also hit the limit-up.

Resource stocks declined sharply, with steel, non-ferrous metals, basic chemicals, utilities, and coal leading the declines. Construction decoration, building materials, oil and petrochemicals, and environmental protection sectors also fell, with power equipment experiencing a correction.

“The core of sector differentiation lies in fund reallocation and differences in sector fundamentals and policy guidance,” said Bi Mengran, a researcher at Gushang Fund, in an interview with the International Financial News. She explained that funds are shifting from cyclical resource sectors to defensive consumption and high-growth technology sectors: driven by risk aversion and pursuit of returns, funds are withdrawing from previously high-flying resource stocks and reallocating to more certain areas. The electronics sector is strengthening based on industry logic: a global chip price surge, explosive growth in AI computing demand causing structural supply-demand imbalances, coupled with significant increases in mobile storage chip prices, are attracting capital back into semiconductor and related fields. Since consumer and tech sectors have a higher weight among Shenzhen market blue chips, they outperform the mainly cyclical Shanghai market.

Obvious Stockpile Fund Game

How should we interpret today’s A-share market performance?

Zhang Pengyuan, a researcher at Paiming Wealth, told the International Financial News that the main reason for the volume contraction today is the wait-and-see attitude of incremental funds and divergence in stock reallocation among existing funds. The afternoon rally was driven by continued fund battles over future consumption and tech policy benefits, combined with rebound in small- and mid-cap stocks in Shenzhen and support from heavyweight stocks. Sector differentiation reflects funds rotating from previously high-flying resource stocks to sectors benefiting from economic recovery and policy-driven tech industries. Overall, this shows short-term stockpile behavior, and sustainability depends on whether new funds and fundamental data can support the trend.

Liu Yan, Director of Trading at Honghan Investment, said that although the market shrank in volume, it rebounded intraday, demonstrating the resilience of current A-shares. This also aligns with the recent “high-low switching” structural feature. After a phase of adjustment, storage chips and other varieties rebounded amid declines in cyclical and dividend-heavy sectors, indicating active stockpile competition among existing funds.

Hu Mohan, fund manager at Mingze Investment, analyzed that today’s volume contraction and afternoon rally essentially reflect rotation under a stockpile game pattern. The market has support on the downside, showing resilience. Funds are gradually shifting from previously high-flying resource sectors to data-supported fields and industries with clear trends. Although resource stocks have pulled back due to short-term profit-taking, the underlying global supply chain restructuring and the supply-demand logic of some varieties have not fully reversed. Future performance will depend more on their fundamental developments.

Bi Mengran believes that today’s market operated with low volume, mainly due to strong market caution and limited willingness of new funds to enter. The afternoon rally was driven by concentrated efforts on quality sectors and marginal emotional recovery, not a broad rebound. Tensions in the Middle East caused some movement in port shipping stocks, adding momentum to the afternoon session. Coupled with market expectations of policy benefits, funds focused on advantageous sectors, forming an afternoon rally. However, without volume support, the rally was limited and did not trigger a market-wide uptrend.

Continued Volatility and Differentiation

After last Friday’s sharp decline, today’s market remained weak. What factors will influence the A-shares going forward? What is the outlook?

“Short-term, the market is likely to continue oscillating with sector differentiation. The Shanghai Index may fluctuate around 4,100 points,” Hu Mohan said, noting that as earnings season approaches, performance will become the core basis for stock differentiation.

Liu Yan believes that there is no significant risk of a large decline in A-shares. With the spring rally over, the current phase is mainly about positioning for annual and first-quarter reports, likely forming a trading range. During this period, it is advisable to accumulate technology stocks with good disclosures on dips and to seize opportunities for profit-taking at high levels.

Fang Lei, Vice General Manager of Xing Shi Investment, said that in the short term, geopolitical conflicts’ duration remains uncertain, and their impact on A-shares persists. As more industries experience earnings recovery, fundamental factors will gradually replace valuation as the main market driver.

“Market may continue a structured pattern of oscillation and differentiation, with mid-cap prosperity and micro performance becoming more important,” said Mingyu Asset. The Iran-U.S. conflict shows no signs of easing, global supply chains are increasingly disrupted, and inflation expectations are rising. The Fed’s rate cut expectations are delayed, affecting market risk appetite.

“Currently, major A-share indices remain in a high-level zone, and the market may continue to oscillate in the short term,” Zhang Pengyuan said. Policies from the National Two Sessions, promoting high-quality development and guiding long-term capital inflows, provide some support. However, after some sectors have already gained significantly, risk appetite may fluctuate, and indices are likely to remain in consolidation.

“Short-term, A-shares are characterized by sector differentiation and structural trends,” Bi Mengran added. On one hand, the volume issue is unlikely to improve soon, with weak willingness of new funds to enter, and intra-market reallocation remaining dominant, limiting a broad rally. The Shanghai Index, influenced by traditional cyclical stocks, may continue to test support at low levels; the ChiNext, with a heavier tech weighting, may remain relatively strong with some upward momentum but also face short-term profit-taking risks. Sector rotation may continue at a rapid pace, with recent gains in semiconductors and port shipping needing further observation. Without new main themes, market sentiment may fluctuate, and the main trend will be consolidation and digestion, with no large declines or volume-driven breakthroughs.

Focus on Tech and Resources

Sector differentiation is evident: consumer stocks continue to strengthen, resource stocks decline further, and tech stocks are not particularly strong. Is the market style shifting? How should positions be allocated?

Hu Mohan recommends maintaining balanced allocations, focusing on two opportunities under controlled positions:

1. Technology: During ongoing corrections, focus on leading stocks in AI+ and semiconductors with industry trends, and gradually build positions on the left side.

2. Resources: Some varieties still have mid-term logic, but short-term signals of stabilization are needed. Maintain observation without rushing to buy.

“The core strategy now is to accumulate quality stocks amid volatility and patiently wait for value realization,” Hu Mohan said.

Mingyu Asset suggests paying attention to resource price increases driven by geopolitical tensions, such as oil, coal, new energy, aluminum, and chemical sectors benefiting from “anti-involution” trends. Also, focus on policies supporting expanding domestic demand and new productive forces, which may present better entry points after corrections, such as AI, semiconductors, robotics, commercial aerospace, and consumer services. Additionally, monitor economic data, Middle East developments, US-China trade negotiations, and the March Fed meeting.

“In the short term, under cautious risk appetite, sectors with stable cash flows and assets may maintain relative advantages, while internal divergence within tech growth stocks may continue,” Zhang Pengyuan said. Structurally, recent funds have concentrated on high-cash-flow and defensive sectors like power, utilities, and resources, aligning with the global trend of HALO trading (asset-heavy, low-elimination assets).

Bi Mengran recommends the following strategies:

1. Focus on certainty in consumer sectors, especially segments supported by policies and with reasonable valuations. The recent strength in consumer stocks is driven by policy benefits and industry recovery expectations, likely to continue in the short term.

2. Rationally view tech stock corrections, and look for low-entry opportunities in quality sub-sectors. Recent tech declines have been followed by capital inflows into electronics, with semiconductors and related fields performing well. The core logic is industry cycle recovery and earnings improvement, not just hype. Tech stocks may continue to consolidate, with some undervalued, solid-growth segments like semiconductors and consumer electronics poised for recovery. Be cautious of US tech adjustments and profit-taking pressures; avoid chasing highs blindly, and wait for dips to buy selectively, focusing on stocks with strong institutional support and clear industry logic.

3. Cautiously avoid resource stocks, wait for stabilization signals. Recent declines in steel, non-ferrous metals, and chemicals are mainly due to commodity price corrections and fund withdrawals. Short-term, these stocks lack clear positive catalysts and show outflows. Although long-term trends relate to global economic recovery and commodity cycles, it’s advisable to avoid bottom-fishing until clear signs of stabilization and commodity price rebounds appear, then consider small positions in high-quality leaders with strong earnings and commodity linkage at low valuations.