Guotai Haitong Strategy Chief Fang Yi: The correction in A-shares will not last long, and the Chinese market is expected to hit an important bottom.

Why does AI · Fang Yiqi predict that the correction in A-shares will end quickly?

Text | Wang Ligang

Editor | Liu Peng

On March 23, the three major indices of the A-share market all declined, with the Shanghai Composite barely holding above 3,800 points at the close. By the end of the trading day, the Shanghai Composite fell 3.63% to close at 3,813.28 points, the Shenzhen Component Index dropped 3.76% to 13,345.51 points, and the ChiNext Index declined 3.49% to 3,235.22 points. The combined trading volume of the Shanghai and Shenzhen markets was 2.43 trillion yuan, an increase of 144.7 billion yuan compared to the previous trading day.

In the market, over 5,100 stocks declined, including 133 stocks hitting the daily limit down. Gold and precious metals concepts led the decline due to a sharp drop in international gold prices, with sectors like finance and tourism also experiencing significant declines.

Notably, the Shanghai Composite Index has fallen for three consecutive days, with a nearly 4% decline this year. After this decline, the index has erased all gains since September 2025.

Regarding the recent decline in the A-share market, Guotai Haitong Securities Chief Strategy Analyst Fang Yiqi believes there are two main reasons. First, inflation risks and expectations of financial tightening, along with the uncertain US-Iran situation, have caused energy inflation and subsequent concerns about financial contraction. Second, the micro-structure of stock trading has loosened. Although external conflicts do not directly impact China logically, uncertain geopolitical expectations have reduced market risk appetite. Recently, stocks and bonds have adjusted simultaneously, with floating gains in fixed income products narrowing and larger floating losses creating investment constraints for institutions with relatively rigid liabilities and high positions since the beginning of the year.

Fang Yiqi states that he expects the A-share correction to be short-lived and that the current level is not suitable for blindly selling off. The Chinese stock market is likely to form an important bottom. Although inflation risks still need to peak, it is also important to recognize that Chinese assets benefit from increased technological productivity, relatively stable security conditions, and a resilient economy, society, and capital markets.

Fang Yiqi believes that stability is the underlying characteristic of China’s stock market, which has a lower risk premium. Due to ongoing US-Iran tensions and energy blockades, some investors’ confidence has weakened. While energy prices do impact China’s market, they will not be the sole driver of risk narratives. China’s relatively stable geopolitical landscape, higher energy self-sufficiency, advancing and even leading technological progress, and a comprehensive industrial system are all rare globally.

In response to investors’ concerns about energy price shocks and expectations of financial tightening, Fang Yiqi points out that, based on historical reference, the US stock market experienced fluctuations in 2022 amid the Russia-Ukraine conflict and multiple substantial Federal Reserve rate hikes but demonstrated strong resilience and rebounds without collapsing. The risk pricing in capital markets generally evolves through three stages: expected shocks, actual shocks, and a return to growth. Risk pricing does not mean waiting for risks to end but rather when the intensity of risks stops rising, and risk pricing concludes.

After risk pricing ends, the key question is whether the market itself has growth capacity. Fang Yiqi states that currently, the US tolerates higher inflation, and the People’s Bank of China emphasizes supportive monetary policy, with greater certainty of easing. Increased technological investment and stable domestic demand in China help to break risk narratives more quickly. Against the backdrop of declining risk-free rates, financial market reforms, and economic restructuring, China’s capital market remains fundamentally stable, and stability is the underlying tone of China’s economy and markets.