A-shares' three major indices collectively stumbled, with the Shanghai Composite Index falling below the 3900 point mark, with nearly 5200 individual stocks in the red.

On March 23, the three major A-share indices all opened sharply lower, with the Shanghai Composite Index opening below the 3,900-point mark for the first time, showing a broad decline. 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 sluggish, with the Nikkei 225 index falling more than 4% at one point, and the KOSPI index in South Korea dropping over 5%.

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, and 14 stocks hit 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.

The market showed clear risk-avoidance 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, however, defied the trend, with main contract prices for coking coal futures hitting the daily limit, up 11%.

Liquidity in the market tightened that day. The central bank conducted a 7-day reverse repurchase operation worth 8 billion yuan at an interest rate of 1.4%. Meanwhile, 137.3 billion yuan of 7-day reverse repos matured, resulting in a net withdrawal of 129.3 billion yuan, further tightening short-term liquidity and increasing market volatility.

On the news front, recent ongoing 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.

At the same time, 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% currently, reaching the highest level since August last year, significantly suppressing valuations of global growth stocks. The external market transmission effects were also evident, with the Nasdaq index plunging 2.01% last Friday, led by declines in tech stocks, which directly affected 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 expansion to earnings 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 but have strong certainty.

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