Key Expectations Shift! Public Funds Latest Statement!

March 23rd, the Asia-Pacific markets declined across the board, and A-shares also struggled during “Black Monday.” Out of 31 Shenwan first-level industry indices, 29 fell, with more than 10 gold-themed ETFs dropping over 9%.

Based on interviews with multiple fund companies in Beijing, Shanghai, and Shenzhen conducted by Securities Times, all mentioned the Middle East geopolitical conflict as the “trigger.” The market’s key expectation that the Middle East conflict is “temporary” is changing. The driving logic behind capital trading has shifted from risk aversion to concerns about re-inflation. Public funds expect the market to collectively hedge risks for about two weeks.

However, these changes are not always negative. Fund managers have observed that under global economic “energy constraints” and energy shocks, countries demonstrating stronger economic resilience and supply stability will gain greater strategic initiative and industrial competitiveness. Companies with cost advantages and stable cash flows are relatively more resilient. Hard-tech companies with core competitiveness, supported by industry trends and policies, still have long-term growth potential.

Key Expectations Changing Behind the Decline

On March 23rd, A-shares showed weakness throughout the day, with major indices falling more than 3%. The Shanghai Composite Index briefly dropped below 3,800 points, with over 5,000 companies declining. Aside from some coal and oil sectors rising, 29 of 31 Shenwan first-level industry indices declined. Domestic funds experienced a “double-edged” situation: a few oil and gas ETFs hit the daily limit up, while more than 10 gold-themed ETFs fell over 9%.

According to interviews with various public fund managers by Securities Times, the main reason is the changing external situation. ICBC Credit Suisse Fund stated that last Saturday, U.S. President Trump said that if Iran fails to fully reopen the Strait of Hormuz within 48 hours, the U.S. will “destroy” Iran’s power plants. Iran responded with four measures. This heightened risk aversion, leading to a global stock market decline on the 23rd.

The market’s reaction to this geopolitical tension is a major factor behind the decline in A-shares. Minsheng Jiayin Fund noted that affected by Middle East tensions, Asian markets opened lower. South Korea’s Kospi dropped over 4%, triggering a circuit breaker, and Japan’s Nikkei 225 fell by 4% intra-day, also triggering a circuit breaker. Under the influence of external market linkages, the market plunged. Major indices opened lower, with the Shanghai Composite breaking below the key support of 3,900 points, and briefly falling below 3,800 points, triggering forced liquidations and a “kill all” sell-off, deepening the decline.

Huaxia Fund pointed out that the Strait of Hormuz carries about one-fifth of global seaborne crude oil trade. It is not a single oil field or pipeline but a crucial passage for global energy supply. According to estimates by U.S. banks, a one-month disruption from Qatar and the UAE would consume about 10% of Europe’s gas storage. If the supply is cut off for 10 weeks, European natural gas prices in Q1 2027 could surpass the 2022 record highs, and Europe might need to restart imports from Russia via the Yamal or Ukrainian pipelines.

Behind this, the market’s key expectation that the Middle East conflict is “temporary” is shifting. Huaxia Fund said that once the market realizes that uncertainties around the Strait of Hormuz will not dissipate quickly, funds will start to withdraw: first exiting risk assets, then tightening liquidity, and finally lowering all valuations. The chain behind the full-day decline on the 23rd is: “Ongoing geopolitical conflict → increased uncertainty of strait navigation → tightening oil supply expectations → rising oil prices → inflation rising → delayed easing expectations → growth pressure → asset revaluation.”

Spotting Trend Opportunities Amid Volatility

Under changing expectations, how will market risk appetite evolve? This is the focus. Minsheng Jiayin Fund said that the core contradiction in the market will shift to supply security and strategic resources, with the driving logic switching from risk aversion to concerns about re-inflation. Rising oil prices reinforce inflation expectations, suppress rate cut prospects, and impact most assets. In the short term, ongoing oil price increases and delayed Fed rate cuts will influence risk appetite, leading to continued volatility in A-shares and a clear market segmentation.

“Risk appetite drops rapidly, and demand for safe assets rises, but this is often a trend,” said China Europe Fund. In the initial phase of macroeconomic shifts, markets tend to seek “beneficiary sectors” based on optimistic inertia. With increased volatility and expectations of rising domestic PPI, defensive assets with dividend styles are gaining attention. Guotai Fund believes that amid liquidity disruptions and risk appetite pressure, the market may collectively hedge risks for about two weeks. However, medium-term market styles are expected to rebound, favoring large-cap growth.

There are also positive factors emerging. Zhang Wenlong, a fund manager at Huashang Fund, told Securities Times that although geopolitical conflicts increase A-share volatility, they also promote two major trend opportunities: first, the weakening of dollar credit expectations is becoming reality. The chain reaction triggered by geopolitical conflicts is accelerating global reassessment of the existing reserve currency system, which will have profound impacts on global capital flows and asset pricing. Second, the global economy faces an additional “energy constraint,” highlighting differences in systemic resilience. In this context, countries demonstrating stronger economic resilience and supply stability under energy shocks will gain greater strategic initiative and industrial competitiveness.

“Domestic liquidity remains loose, with low risk-free rates, and policy support for the stock market remains unchanged; at the same time, recovery in overseas economic growth and domestic policy backing help maintain relatively stable short-term economic growth. Additionally, structural highlights such as supply clearing in traditional industries and increased demand driven by AI suggest that listed companies’ profits still have growth potential. We believe that after risk aversion subsides, the market will return to fundamentals-based valuation logic, and the outlook remains positive,” said ICBC Credit Suisse Fund.

Performance Certainty and Delivery Capability Are the Core of Quality Assets

Minsheng Jiayin Fund recommends focusing on AI and resource sectors. Massive data training and processing have driven explosive demand for advanced storage technologies and large data centers. The intensifying global AI competition will also sustain high demand for high-performance chips, boosting the entire hardware supply chain from advanced packaging to servers. Additionally, under geopolitical tensions (Middle East situation) and de-dollarization trends, resource assets—being tangible—have natural hedging properties. The explosive growth in AI computing power and grid upgrades (UHV, data centers) will significantly boost demand for industrial metals like copper, aluminum, and tin, benefiting resource sectors.

Caitong Fund notes that the current core trading logic is not about betting on a quick end to the war but on the duration of high oil prices affecting inflation, interest rates, and economic fundamentals. In this context, sectors with clear industry trends and prosperity are more resilient, with AI still a key allocation focus. During market turbulence, performance certainty and delivery capacity are fundamental. Focusing on high-growth, high-performance quality stocks offers a chance to navigate short-term geopolitical and macro fluctuations with patience.

“It is advisable to adopt a barbell strategy of high-dividend defensive sectors and technology growth sectors, focusing on high-dividend and resource stocks with defensive attributes to cope with market volatility. Companies with cost advantages and stable cash flows are more resilient. Going forward, closely monitor international developments, domestic policy implementation, and first-quarter earnings guidance. Short-term adjustments in tech growth may also present medium- and long-term opportunities, especially for core-competitiveness hardware tech firms supported by industry trends and policies, whose long-term growth logic remains promising,” said Jinxin Fund.

In Hong Kong stocks, Qu Shaojie, Deputy General Manager of Great Wall Fund’s International Business Department and Fund Manager, told Securities Times that China and the surrounding environment remain stable, providing solid support for Hong Kong stocks. In recent years, southbound funds via HKEX have continued to flow in significantly, with net inflows of about HKD 800 billion in 2024, reaching HKD 1.4 trillion in 2025, and expected to continue in 2026. Liquidity in Hong Kong stocks is not a concern. Against rising global uncertainties, China’s steady development is likely to become a “safe haven” for funds. With attractive valuations and dividend yields, Hong Kong stocks will continue to attract domestic and foreign institutional investors.

“Under the combined effects of profit recovery, improved liquidity, low valuation levels, and policy support, the overall trend of Hong Kong stocks remains positive. The AI wave continues to evolve, and the scarce tech stocks in Hong Kong have considerable upside potential. High-quality blue-chip stocks with reasonable valuations, such as leading internet companies, are expected to stabilize gradually. Focus on investment opportunities in broad growth sectors like internet technology, healthcare, and new consumption,” said Hengsheng Qianhai Hong Kong Stock Connect Value Hybrid Fund Manager Xing Cheng.