A-share midday review | Trading is as fierce as a tiger, all rise and fall depends on Trump! A-shares 4200 stocks are down, still considered a "safe haven"?

On the morning of April 2nd Beijing time, US President Trump made a nationwide TV address on the Iran situation. The market originally bet that he would signal a cooling down, but instead, they got a new threat: he announced a "very strong strike" against Iran in the next two to three weeks. The frenzy of Trump's actions determines the ups and downs! Trump's latest speech reversed the trend of the financial markets. Asian-Pacific stock markets went from rising to falling, with the Japanese and Korean stock markets leading the decline. At the same time, US stock index futures also fell sharply, the US dollar rose against most currencies, oil prices surged, and gold, silver, and other precious metal futures all declined. In the morning session, the three major A-share indexes opened low and continued to fall, with over 4200 individual stocks declining. By midday, the Shanghai Composite Index fell by 0.53%, the Shenzhen Component Index fell by 1.15%, and the ChiNext Index fell by 1.78%. The turnover of the Shanghai and Shenzhen stock markets in the morning was 1.19 trillion yuan, 141.1 billion less than the previous trading day. It is worth noting that several institutions quickly made judgments after Trump's speech ended, and the core conclusion was highly consistent: this was not the signal the market wanted. Robert Subbaraman, Chief Global Market Research Director at Nomura Securities, said that Trump's speech "did not send a clear signal of cooling down the situation, as the market had hoped." Dilin Wu, Research Strategist at Pepperstone Group, bluntly stated that Trump's speech was "indeed disappointing." She pointed out that Trump's earlier statements about withdrawing from the Middle East, "now seem more like an attempt to appease the market while maintaining pressure options," and "he clearly still tends towards a strategy of subtly easing tensions rather than simply cooling them off." Overcoming the crisis of the US-Iran-Israel war, Reuters found that China, which was fully prepared for energy shocks, is the most resilient, which also helped Chinese financial markets deliver a leading performance globally in March. Global investors are actively seeking to increase their holdings in Chinese assets. Reuters also emphasized that in a tumultuous month where investors had almost nowhere to hedge, the stability of the Chinese market further strengthened the investment logic of holding Chinese assets, both as a short-term safe haven and a long-term anchor. Returning to the market, pharmaceutical concepts such as drugstores, innovative drugs, generic drugs, and traditional Chinese medicine continued to strengthen, with many stocks hitting their daily limit. Fiber optic concepts continued to rise, as did oilfield services, oil and gas concepts, and the port shipping concept. The lithium resource sector rebounded, as did the biomedical sector. On the downside, AI programming and AI application concepts all plummeted, and the semiconductor and hard technology sectors continued to decline. Key sectors 1. Oil and gas stocks rebounded significantly, with stocks like Hunan Heshun Petroleum and Shanxi Blue Flame Holding hitting their daily limit. 2. Pig industry concepts rebounded, led by companies such as DAYU BIOLOGICAL. 3. The pharmaceutical sector saw a counter-trend rise, with companies like Tianjin Tianyao Pharmaceuticals and PKU HealthCare Corp., showing strength. 4. Fiber optics continued to rise, with companies like Shandong Xinneng Taishan Power Generation and Jiangsu Zhongli Group leading the way. Institutional views China Galaxy Securities: The market is expected to enter a stage of oscillation and structural rotation China Galaxy Securities Chief Analyst Yang Chao believes that as the US-Iran ceasefire negotiations begin and uncertainties related to the financial reporting season gradually disappear, the market is expected to enter a stage of oscillation and structural rotation. The three main logics of policy support, fund entry into the market, and revaluation of Chinese assets remain unchanged. A-shares have limited downward space, and it is recommended to adopt a strategy focusing on performance and seizing opportunities. In terms of specific allocations, Yang Chao suggests focusing on three main directions: first, the strategic resource value revaluation sector, where there is increased market focus on inflation expectations and geopolitical security, and assets like gold, copper, rare earths, and key materials are expected to be revalued. Secondly, the sector of technological independence and new quality productivity, which will see multiple major technology summits in April, is expected to catalyze industries like AI computing power, fiber optic modules, semiconductors, and high-end manufacturing. Thirdly, defensive sectors like high dividend stocks and stable cash flow, which are still preferred during market volatility. It is recommended to focus on sectors such as public utilities, environmental protection, and pharmaceutical outsourcing. CITIC Securities: Continuous optimism for the comprehensive recovery of the pharmaceutical industry chain A CITIC Securities report stated that the enthusiasm for innovative drugs in China has led to a resurgence in downstream demand, with a significant drop in the proportion of equity financing in corporate funding sources and an increase in the proportion of business development transactions to nearly 40%. In the first quarter of 2026, overseas BD transactions exceeded $600 billion, accounting for nearly half of the total for the full year of 2025. Looking at different sectors, small molecule CDMOs are expected to receive more orders, as they leverage China's global supply chain advantage, combined with stable domestic supply amidst the Middle East conflict. Clinical and pre-clinical CRO companies are expected to see an increase in both volume and price due to the improvement in financing and early research demand. Research service and upstream sectors may experience short-term revenue fluctuations due to exchange rate fluctuations in the fourth quarter of 2025, but the expectations for early research demand in 2026 remain strong. Key companies in these sectors could see revenue growth of over 20%, and their current valuations are reasonable. The report recommends focusing on leading CXO companies, key companies in the clinical and preclinical CRO stages, and companies in the research service and upstream sectors with relatively reasonable valuations. Huaxi: Continue to explore undervalued sectors The undervalued style continued to dominate in the first quarter. The overall market valuations were high, and risk appetite was under pressure, with funds showing a fear of heights. However, the logic of market stability remains, and directly exiting the market may lead to missing out on rebound profits. In this situation, funds tend to explore opportunities for undervalued stocks. In the second quarter, it is recommended to continue exploring undervalued sectors. From a PE and PEG perspective, sectors like power equipment and media are worth considering, with their PE (TTM) percentiles since 2016 at around 67% and 68% respectively, and PEG ratios at 0.91. From a PB perspective, sectors like agriculture and finance are worth watching, as their PB percentiles are generally below 20%, with ROEs above 8%. Meanwhile, sectors like non-ferrous metals and coal have high PB percentiles, and their market performance depends on whether inflation can continue to surpass expectations. Translated from "Tencent Stock Selection" by GMTEight, edited by Wang Qiujia.