Shanghai Index Barely Holds 3800 Points! ETFs Face Extreme Swings, Margin Trading Cools Down—Where Is Market Capital Flowing?

Interface News Reporter | Sun Yizhen Du Meng

On March 23, the major stock indices in both markets experienced significant adjustments, with the Shanghai Composite barely holding above 3,800 points. Nearly 5,200 A-share stocks declined.

By the close of trading, the Shanghai Composite fell 3.63% to 3,813.28 points, the Shenzhen Component Index dropped 3.76%, the ChiNext Index declined 3.49%, and the STAR Market Index decreased 4.93%. The combined trading volume of the Shanghai and Shenzhen markets was approximately 24.315 trillion yuan, an increase of about 1.446 trillion yuan compared to the previous trading day.

In terms of sectors, coal and oil closed higher; industries such as non-ferrous metals, smart wearables, MLED, precious metals, and beauty and personal care, along with related concepts, led the declines.

Wind data shows that on March 23, 2,349 ETFs in the entire market exhibited a “polarized” trading pattern, with 8 crude oil ETFs hitting the daily limit up and 17 gold ETFs falling more than 9.5%.

Multiple crude oil ETFs hit the daily limit up, while gold ETFs hit the daily limit down. Source: Wind, compiled by Interface News

Since March, looking at the flow of funds, out of the 2,349 ETFs in the market, 1,031 experienced net capital inflows.

Specifically, the top inflows were seen in precious metals ETFs and strategy-style ETFs. The five ETFs with the largest inflows were HFT Short-term Bond ETF (511360.SH), China Power Grid Equipment ETF (159326.SZ), Huaxia Gold ETF (518880.SH), E Fund Gold ETF (159934.SZ), and Guotai CSI Oil & Gas ETF (561360.SH), with inflows of 9.781 billion yuan, 8.932 billion yuan, 5.145 billion yuan, 3.456 billion yuan, and 3.421 billion yuan, respectively.

The five ETFs with the largest outflows were E Fund ChiNext ETF (159915.SZ), Southern CSI 500 ETF (510500.SH), Penghua Chemical ETF (159870.SZ), Huaxia A500 ETF (512050.SH), and Wanguo Hong Kong Stock Connect Internet ETF (159792.SZ), with outflows of 9.028 billion yuan, 5.697 billion yuan, 5.143 billion yuan, 4.51 billion yuan, and 4.341 billion yuan, respectively.

Currently, market leverage funds are showing a strong risk-averse sentiment.

As of March 20, the combined margin financing and securities lending balance in the Shanghai, Shenzhen, and Beijing markets was 26.3229 trillion yuan, a decrease of 17.834 billion yuan from the previous trading day; the total margin balance was 26.1484 trillion yuan, down 17.408 billion yuan; and the securities lending balance was 1.7451 billion yuan, down 426 million yuan.

Since March, the flow of margin funds shows that, based on Shenwan’s secondary industry classification, sectors such as IT services, small metals, and components experienced net outflows; however, data from Eastmoney Choice indicates that the battery sector attracted 1.189 billion yuan in net inflows on a single day, with communication equipment, diversified finance, and flavor fermentation products following, receiving modest net inflows.

Looking at a longer timeline, leverage trading activity has cooled since March. During the 15 trading days with available data this month, the overall margin balance in the market has declined, shrinking by 41.713 billion yuan from the beginning of the month as of March 20.

Amid the current broad adjustment and rapid sector rotation in the A-share market, most opinions believe that, against the backdrop of frequent geopolitical risks in 2026, global security has become a scarce resource, and Chinese assets carry a safety premium.

“Security has become the most scarce commodity globally right now. Buying China is buying safety,” said Liu Yuhui, Vice Director of the Financial Development Center and Chief Economist of Shanghai, in an interview with Interface News. “This is a clear consensus formed amid global turmoil, and it is also the answer provided by China’s supply chain and large-scale market infrastructure. In the future, only through China’s supply chain can safety be purchased. This is not just a slogan but an irresistible choice.”

“Stability is scarce, and the Chinese market has a lower risk premium,” pointed out the Guotai Haitong Strategy Team. They noted that China’s risk-free yield decline, financial market reforms, and economic structural transformation are the fundamental drivers and pillars of China’s “transformation bull market.”

Regarding foreign investment, UBS Wealth Management CIO Office issued a statement on March 23, stating that the current investment environment is complex, with the market’s main concern being whether the Middle East conflict will cause long-term disruptions to energy supplies and how it will impact the global economy. “Nevertheless, we believe that the economic fundamentals still support the market.”

Jiang Xianwei, Senior Global Market Strategist at Morgan Asset Management China, told Interface News that, from a macro perspective, the main catalysts for the A-share market’s upward movement this year include the relatively early development stage of artificial intelligence, with related demand growth likely to boost economic growth—especially given the unique opportunities brought by domestic self-reliance. Additionally, last year’s “anti-involution” policies led to a rebound in product prices and profits in some sectors, and with continued policy support this year, more industries and companies are expected to benefit.

CITIC Securities believes that a recovery in corporate profit margins is key to the next phase of the A-share bull market. Disruptions in the global supply chain once again provide an opportunity to test China’s manufacturing advantage and pricing power. The rapid rise in oil prices offers a window to observe whether China’s manufacturing sector can truly demonstrate structural pricing power. The recent Middle East conflict and its impact on energy costs give us a chance to verify whether China’s manufacturing advantage can be reflected in pricing power. The firm remains focused on sectors such as chemicals, non-ferrous metals, electrical equipment, and new energy, which are aligned with China’s manufacturing advantages.

For future allocations, Ping An Fund recommends focusing on three main themes: first, technology growth sectors benefiting from policy support and industrial upgrades—including infrastructure, semiconductors, and high-end manufacturing— which have medium- to long-term growth potential amid global supply chain restructuring and self-reliance logic; second, high-dividend assets with stable cash flows and dividend-paying capacity, which offer defensive attributes and value in an environment of fluctuating interest rates and increased market uncertainty; third, upstream energy and commodities sectors benefiting from rising resource prices, which can hedge against inflation and have relatively clear profit resilience.