A-shares three major indices collectively declined, Shanghai Composite Index fell below 3,900 points, with nearly 5,200 individual stocks in the red

How AI · How Middle East Geopolitical Conflicts Trigger Collective Decline in A-shares?

On March 23, the three major A-share indices opened sharply lower, with the Shanghai Composite Index falling below the 3,900-point mark at the open, indicating a broad decline across the market. As of the latest report, the Shanghai Index was at 3,874.76 points, down over 2%; the Shenzhen Component Index was at 13,617.1 points, down 1.8%; and the ChiNext Index was at 3,299.45 points, down 1.57%. Meanwhile, early trading in the Asian markets was generally weak, with the Nikkei 225 index dropping over 4% at one point, and the KOSPI index falling over 5%.

Collective Drop of the Three Major Indices

Wind data shows that on that day, a total of 221 stocks in the two main A-share markets and the Beijing Stock Exchange rose, while 5,184 stocks declined. There were 84 stocks unchanged, with declining stocks accounting for over 95%. Nearly 5,200 stocks fell, with 14 hitting the daily limit down. In terms of trading volume, the combined turnover of the Shanghai and Shenzhen markets exceeded 1 trillion yuan during the same period compared to the previous trading day.

Market Overview shows clear risk aversion and defensive characteristics. Previously popular sectors suffered heavy losses, including gold, non-ferrous metals, CPO (co-packaged optics), computing hardware, and semiconductor chips. Coal stocks performed countercyclically, with main contract prices for coking coal futures hitting the daily limit, up 11%.

Liquidity-wise, the market experienced tightening. The central bank conducted 80 billion yuan of 7-day reverse repurchase operations at an interest rate of 1.4%. On the same day, 137.3 billion yuan of 7-day reverse repos matured, resulting in a net withdrawal of 129.3 billion yuan. This short-term liquidity tightening further increased market volatility.

On the news front, recent escalation of Middle East geopolitical conflicts has triggered global market turbulence. Tensions in the Strait of Hormuz intensified, pushing up international crude oil prices, with Brent crude briefly surpassing $107 per barrel, heightening global inflation expectations.

Meanwhile, the Federal Reserve’s hawkish stance strengthened, and market expectations of a shift in monetary policy were disappointed, leading to a rapid rise in U.S. Treasury yields. The 10-year U.S. Treasury yield surged from 3.97% at the end of February to 4.39%, reaching the highest level since August last year, significantly suppressing valuations of global growth stocks. The external market contagion was also evident, with the Nasdaq index plunging 2.01% last Friday, led by technology stocks, directly affecting the opening sentiment of the A-share market’s tech sectors like AI and semiconductors.

CITIC Securities’ research report pointed out that the escalation of Middle East tensions is gradually pricing in the risk of prolonged conflict. The core liquidity logic of this bull market faces challenges, and the market may experience a prolonged period of adjustment as it transitions from valuation-driven gains to earnings-driven growth. Industry allocation favors sectors benefiting from high oil prices, defensive stocks with stable cash flows, and certain growth stocks that may be unfairly punished.

Everbright Securities believes external factors currently exert some pressure on A-shares. On one hand, tensions in the Strait of Hormuz persist, causing turbulence in the global energy markets and rising U.S. inflation expectations; on the other hand, the Fed’s hawkish stance adds liquidity pressure on global capital markets. However, some positive factors remain, such as the central bank’s proactive stance, strong economic data from January and February, and relatively less impact of Middle East tensions on the domestic economy. Overall, the market is expected to fluctuate mainly sideways.