Volatility does not change the long-term trend! Brokerage firms collectively express: remain optimistic about the A-shares medium and long term

Due to the escalation of tensions in the Middle East, recent external markets have shown a significant decrease in risk appetite, leading to increased volatility in the A-shares market.

On March 9, the three major A-share indices experienced wide fluctuations, with the Shanghai Composite Index temporarily falling nearly 2% intraday, and the Shenzhen Component and ChiNext indices dropping over 3% at one point. However, these declines subsequently narrowed significantly. By the close, the Shanghai Composite fell 0.67%, while the Shenzhen and ChiNext indices declined 0.74% and 0.64%, respectively.

Several institutional analysts interviewed by Securities Times stated that as market risks are released, the A-shares are expected to resume a volatile upward trend. In the long term, reforms in the A-share market still have many major policies in the pipeline, continuously promoting the transition from a “financing market” to an “investment market,” and building a core policy framework for sustainable, long-term development. These policies will have profound impacts on the market ecosystem, capital structure, valuation system, and investment styles.

External Turbulence Influences A-Share Market

“External geopolitical situations are the main reason for increased volatility in the A-share market, and their impact is expected to persist and fluctuate in the near future,” Yuan Chuang, Chief Economist at Caixin Securities, told Securities Times when discussing recent market fluctuations.

Yuan believes that conflicts in the Middle East and the trajectory of US tariffs are both highly uncertain. The conflict in the Middle East has caused oil prices to surge significantly, affecting the global economy and asset prices. Meanwhile, US stock indices have recently experienced volatility and declines, Japanese and Korean markets have peaked and retreated, and Hong Kong stocks remain weak. These are driven by geopolitical risks and concerns over AI business models, which to some extent also dampen market sentiment in A-shares.

Fu Jingtao, Chief Analyst of A-share Strategy at Shenwan Hongyuan Research, also considers external market changes as one of the core factors behind recent A-share fluctuations.

He noted that the recent halt in oil shipping through the Strait of Hormuz has driven oil prices higher, boosting inflation expectations and increasing market uncertainty. This uncertainty resonates with “HALO trading,” leading to a general decline in global risk appetite. However, Fu believes that in the medium to long term, many variables remain, but the short-term asset prices reflect relatively simple signals. This suggests that the current correction may contain forces of overreaction and overselling.

Volatility Does Not Change Long-Term Trends

“Early-week sharp fluctuations in A-shares are not indicative of a trend reversal but are a short-term release of emotions under external pressures. The medium- and long-term upward trend remains intact,” Yang Chao, Chief Strategy Analyst at Galaxy Securities, told Securities Times, expressing optimism about the market’s future.

He analyzed that, on one hand, the 2026 government work report emphasizes domestic demand-led growth, cultivating new drivers, and achieving high-level technological independence, which supports structural market opportunities. The upcoming release of the “14th Five-Year Plan” outline will provide a clear long-term investment direction, encouraging capital to flow into high-quality sectors aligned with national strategies. On the other hand, the intensive disclosure of 2025 annual reports and 2026 Q1 reports will become key anchors for the next phase of the market, with companies exceeding expectations likely to attract investment.

Yuan also stated that, in the medium term, driven by continuous household savings inflows, improvements in corporate performance amid anti-inflation efforts, and a new wave of technological revolution, the current A-share oscillation and upward trend will persist.

He expects that the macro narratives of price increases and technological revolutions in 2026 will continue, but capital will likely shift from high to low, with chemicals potentially replacing non-ferrous metals as the leading sector for price increase concepts. AI applications may replace hardware, and domestic computing power chains could substitute overseas ones, opening new avenues for AI technology breakthroughs. Additionally, after gold and precious metals prices continue to rise, volatility has increased significantly, and risks are more apparent. Sectors like consumer staples, which have undergone long-term adjustments, are increasingly attractive due to their dividend yields, and are expected to replace the red-hot sectors as defensive choices in 2026.

“Range-bound trading may continue for 1-2 quarters, and there could be a second upward phase in the second half of 2026,” Fu Jingtao said.

Guotai Haitong’s Chief Strategy Analyst Fang Yi also analyzed for Securities Times that the shocks from Middle East tensions have caused sharp fluctuations across various asset classes. However, from a global perspective, China’s capital market remains one of the most stable and resilient.

Fang Yi stated that these fluctuations will not alter the overall upward trend of China’s capital market. Looking globally, after the “tariff conflicts” in 2025 and the “US-Iran conflict” in 2026, international and domestic capital will pay more attention to China’s increasing international influence, robust manufacturing and supply chains, technological development, social stability, and market stability. These characteristics are currently scarce worldwide, and China’s higher proportion of “hard assets” and manufacturing capacity give it a competitive advantage.

Reforms Strengthen the Foundation of A-shares

This year’s government work report explicitly states the goal to “continue deepening comprehensive reforms of the capital market, further improve the long-term capital entry mechanism, and enhance investor protection systems.” Fang Yi commented that in 2026, reforms will focus on comprehensive investment and financing reforms and high-quality development. The reform of the capital market’s investment and financing mechanisms will continue to deepen, with improvements to the “Chinese-style” market stabilization mechanisms, the upcoming release of the overall plan for the ChiNext reform, and optimization of the refinancing review and registration system.

Yang Chao emphasized that these are core policies driving the transformation of the A-share market from a “financing market” to an “investment market” and establishing a sustainable, long-term development ecosystem, which will have profound impacts on market ecology, capital structure, valuation systems, and investment styles.

He further explained that, in the medium term, the market ecology will improve, and valuations will be reshaped. The investor structure will upgrade, with institutional investors increasing their share, transforming the market from a “retail-dominated” to an “institution-led” market, enhancing market efficiency. Valuation systems will be reconstructed, with high-quality companies enjoying valuation premiums, while underperformers and those with financial misconduct will be phased out more rapidly, normalizing delistings and fostering a “good money drives out bad.”

Yang believes that as reforms are further implemented, the foundation for a long-term slow bull market and value investing will strengthen, market stability will improve, and long-term capital will serve as a “ballast,” significantly reducing index volatility. The function of direct financing will be enhanced, with increased equity financing supporting technological innovation and industrial upgrading, creating a positive cycle of “economic acceleration—capital market prosperity—household wealth growth.” In terms of investment styles, long-term, value, and rational investing will become mainstream, shifting the stock-picking logic from “speculating on concepts and policies” to “performance, dividends, and governance.”

Yuan also noted that through a series of reforms, the market’s internal stability will be significantly improved, helping to reduce volatility, enhance investor experience, and strengthen the service functions of the capital market. This will better support household wealth preservation and appreciation, serve the real economy, and accelerate technological independence and self-reliance. The balance between the investment and financing sides of the capital market will be improved, fostering a virtuous cycle of mutual benefits among the market, listed companies, and investors.

Fu Jingtao stated that building a culture of long-term investing is a systemic project requiring coordinated efforts from regulators, investment institutions, sales channels, and investors. “In the long run, if institutions committed to long-term investing can expand their scale and residents committed to long-term investing can achieve stable returns, the long-term investment concept will naturally become ingrained. The current market shift from bear to bull is supported by improvements in the A-share investment and financing functions. Future steady and sustainable growth will also rely on the integrated development of these functions,” he concluded.

(Article source: Securities Times)