A-share market midday review | Sentiment drops to freezing point! All three major indexes fell by more than 2%, with the Shanghai index falling below 3900. When will the "bottom time window" arrive?

On March 23, the market opened lower in the morning and all three major indexes fell by more than 2%, with the Shanghai Composite Index falling below the 3900-point mark. On the market, weak themes were rotating, emotions dropped to freezing point, and nearly 5000 stocks in the entire market declined. By midday closing, the Shanghai Composite Index fell by 2.5%, the Shenzhen Component Index fell by 2.53%, and the ChiNext Index fell by 2.44%. The trading volume in both Shanghai and Shenzhen reached 1.46 trillion yuan in the first half of the day, an increase of 155 billion yuan from the previous trading day. From a news perspective, the Middle East geopolitical situation suddenly heated up over the weekend, putting pressure on global markets on Monday, with Asian stock markets plunging and precious metals simultaneously weakening. So, when will the market bottom out and how much will it affect the Chinese market? Apart from Japan, Sneader, the Asia-Pacific chairman of Goldman Sachs, expressed "quite optimism" towards the South Korean market, stating that the impact of energy factors on China is relatively small. Jim Reid, a strategist at Deutsche Bank, reviewed the performance of the US stock market after 30 major geopolitical events and found that the S&P 500's average low point usually occurs about 3 weeks after the shock. The market is currently approaching this time window, with a median of about -6% for the maximum rollback after each event. Reid also said that the market usually recovers most of the lost ground within 34 days after the shock. Independent research firm Variant Perception also believes that market sentiment is about to undergo a change, and uncertainty may peak in the coming days. The firm also pointed out that the recent simultaneous sharp decline in gold and stocks is a signal of "de-risking" and forced liquidation, which often heralds the market's bottom nearing. Michael Hartnett, a strategist at Bank of America, pointed out that the market has not completely "surrendered" yet, but it is nearing a critical moment. He believes that when about 88% of global stock indexes simultaneously fall below their 50-day and 200-day moving averages, it will be the best time to increase risk exposure. The S&P has already reached this level, but the global market may need to fall another 3% to 5% to trigger a buying signal. Hartnett estimates that if oil prices fall below $100 per barrel, the market will have more confidence in adding risk assets again. In terms of the market, the coal sector rose against the trend, with Yunnan Coal & Energy, Shanxi Coking Coal Energy Group, and Liaoning Energy Industry hitting their limit up; oil and gas stocks rose, with BOMESC Offshore Engineering hitting the limit up; the space photovoltaic concept was active, with Hunan Huamin Holdings and Jiangsu Zhongli Group hitting the limit up; power stocks were active, with Huadian Liaoning Energy Development, Beijing Orient EcoEnergy, among others hitting their limit up; power equipment concept was on the rise. San Bian Science&Technology hit the limit up; chemical stocks oscillated higher, with Inner Mongolia Jinmei Chemical Technology hitting the limit up; Siasun Robot&Automation concept stocks showed some strength, with Kingfa Sci. & Tech. and Ningbo Zhongda Leader Intelligent Transmission hitting the limit up. In addition, lithium mining, new energy vehicles, and other sectors also performed well. In terms of declines, the precious metal sector fluctuated lower, with Chifeng Jilong Gold Mining hitting the limit down; the computing hardware stocks were all pulling back, with optic modules, high-speed copper cables, and others leading the declines, with Sanan Optoelectronics hitting the limit down; the semiconductor chip industry chain showed weak trends, with Hunan Goke Microelectronics and Giantec Semiconductor Corporation falling by over 7%; the tourism and hotel sector fluctuated lower, with Hubei Three Gorges Tourism Group, Guilin Tourism Corporation, Emei Shan Tourism, and others falling by over 7%; the agriculture and breeding concept fluctuated lower, with Muyuan Foods and Tianshui Zhongxing Bio- technology falling by over 7%. In addition, the insurance, beauty care, and aviation sectors did not perform well. Popular sectors 1. The precious metal sector declined The precious metal sector led the declines, with Chifeng Jilong Gold Mining hitting the limit down, Shanjin International Gold falling by over 8%, and Zhongjin Gold Corp., Ltd., Shandong Gold Mining, Western Region Gold following suit. Review: On the news front, on March 23, the international spot gold market continued its volatile trend of the previous week, with the price of London gold plunging significantly in intraday trading, officially breaking below the key support level of $4400 per ounce, setting the longest consecutive decline since October 2023. The traditional safe-haven logic of the market temporarily failed, and the reallocation of funds triggered a chain reaction in the global financial markets. 2. Active space photovoltaic concept The space photovoltaic concept was active, with Hunan Huamin Holdings and Jiangsu Zhongli Group hitting the limit up, and Risen Energy, GCL System Integration Technology, Suzhou Maxwell Technologies, and others following suit. Review: On the news front, Tesla's self-built chip factory project, "Terafab," is set to start in the near future. On March 21, Musk revealed on social media that the project aims to produce over 1 terawatt of computing power annually, with about 80% for space and about 20% for the ground. The Terafab project will be jointly operated by Tesla and SpaceX. 3. Coal sector rose against the trend The coal sector rose against the trend, with Yunnan Coal & Energy, Shanxi Coking Coal Energy Group, and Liaoning Energy Industry hitting the limit up. Review: On the news front, coking coal futures rose by over 9%. CITIC SEC released a research report stating that the Middle East geopolitical conflict has lasted for more than three weeks, and the rise in international oil and gas prices shows good sustainability. Currently, although the demand for thermal coal is facing the off-season in the short term, the coal demand from the chemical industry (a core stock) may continue to be released, driving the coal price to rebound; under the improvement in short-term demand, the coking coal price is also seen as stabilizing and bullish. Coupled with overseas support, the firm is optimistic about the upward potential and sustainability of domestic coal prices, and continues to see the sector performing well. Institutional Views 1. CITIC SEC: Some core disputes about the impact of the Middle East conflict will gradually have answers after April CITIC SEC believes that some core disputes about the impact of the Middle East conflict will gradually have answers after April. The answers to the aforementioned core issues will be gradually implemented in April. Before that, the market will still be in a narrative game stage, reflecting the characteristics of liquidity ebbing. Firmly focus on the layout of China's pricing power in advantageous manufacturing. The current bottom-building recommendation is still industries with advantages in China's share, high overseas production reset costs, and industries with supply flexibility easily affected by policies, based on new energy, chemical industry, power equipment, and non-ferrous metals. 2. Huaxi: Quietly waiting for more "market-stabilizing" policies to be introduced Huaxi believes that last week, most global stock markets fell, with A-shares and European stocks leading the decline. On the one hand, the US-Iran geopolitical situation is still uncertain, and there is significant uncertainty in the future oil prices and inflation trends, increasing the tail risks of stagflation; on the other hand, the Federal Reserve kept interest rates unchanged at its March meeting, but its statement was hawkish, not ruling out the possibility of a rate hike, raising concerns in the market about a tightening US dollar. Under the suppression of risk appetite, the overall market of A-shares retreated, the market turnover continued to shrink, reflecting a continued cooling of trading sentiment in an environment of fast sector rotation. Structurally, defensive sectors such as food and beverage, banks, as well as high-growth sectors such as storage, AI computing power, are relatively advantageous. 3. Huaan: When will the current benign correction end? Huaan believes that overseas tariff risks continue to accumulate, the US-Iran conflict remains unresolved, inflation concerns have pushed the Federal Reserve noticeably hawkish, incremental policies in China are unlikely to be introduced due to strong economic data, and the market is expected to continue to maintain a weak and volatile trend. In terms of allocation, short-term dividend assets such as banks, utilities, and industries with price increase catalysts such as chemicals, mechanical equipment, storage, etc., are expected to perform better, while the growth style remains unchanged as the core theme in the medium term but is undergoing a short-term adjustment. As the market is expected to enter the second phase of profit-driven bull market after the adjustment, we call the current adjustment a benign correction. This article is reprinted from "Tencent Stock Selection", GMTEight Editor: Wang Qiujia.