The Shanghai Composite Index opened lower and declined, risking to stay below 4,000 points. How will the market move in the future?

On March 19, all three major A-share index benchmarks saw declines across the board.

Among them, the Shanghai Composite Index opened lower, kept falling, and closed down 1.39%. Near the end of the trading session it briefly slipped below the 4,000-point level, but it then quickly rebounded to hold above 4,000 points, closing at 4,006.55. The Shenzhen Component Index fell 2.02%, and the ChiNext Index fell 1.11%.

Regarding the market adjustment, a securities firm strategy analyst told a reporter from The Paper that: “The market has been adjusting for some time recently, and at this stage the logic behind the market adjustment is also relatively clear. First, high oil prices—oil prices remaining persistently high have brought some concerns, such as input-driven inflation. Second, risk appetite—especially some short-term uncertainties—has a bigger impact on market sentiment. At the same time, adjustments in overseas equity markets have also, to a certain extent, been transmitted.”

Specifically, on the oil price front, Industrial Bank Securities said that an escalation of overseas geopolitical conflicts has pushed up oil prices, which has reversed expectations for inflation to cool. The resulting expectation of tighter liquidity has weighed on all kinds of assets.

On risk appetite, China Europe Fund said that currently overseas geopolitical risk still carries a relatively high level of uncertainty. As geopolitical uncertainty worsens, it may keep global market volatility at high levels. “If oil prices continue to stay at an elevated level, global assets may further compress risk appetite under worries about stagflation. ” China Europe Fund further added.

Zhang Gang, an analyst at Central China Securities, analyzed that the key factors suppressing the market right now come from overseas. Escalation of overseas geopolitical conditions has triggered turmoil in global capital markets, and “stagflation” concerns brought by a surge in oil prices have suppressed risk appetite. This has caused interest rate cut expectations for the Federal Reserve to be delayed, increased volatility in U.S. Treasury yields, and created valuation pressure on global equity assets—especially technology growth stocks with higher valuations.

In addition, Industrial Bank Securities said that the pullback pressure from prior gains has also been one of the reasons for this round of adjustment. Since April 7, 2025, A-share assets have accumulated relatively large gains. The CSI 300, the ChiNext Index, and the micro-cap index have risen by 19%, 31%, and 64%, respectively, leaving room for a correction.

After the Shanghai Index briefly dipped toward the 4,000-point level, what will the market play out next?

In response, the aforementioned securities firm strategy analyst believes that, on the one hand, the central bank’s latest statements after market close on Thursday (March 19) will boost market sentiment. But on the other hand, the situation regarding overseas geopolitical conflicts is still unclear, and some uncertainties have not yet been eliminated.

“Meanwhile, from the view of the trading board, although the recent market adjustment overall has shown a continuous shrink in trading volume, on Thursday there was a certain degree of volume expansion. Therefore, overall, it cannot be ruled out that the market will continue to trade in a range with fluctuations.” The securities firm strategy analyst said.

An investment consultant at a brokerage in Shanghai said that the market is currently approaching a low point, but the probability that this low point will lead to a V-shaped rebound is not high. At present, the first time window for a Federal Reserve rate cut is from June to September, and the probability of a rate cut in June is declining. At the same time, investor sentiment has been relatively poor these past two days.

“Next, if it breaks below 4,000 points and with shrinking volume, that will be a good opportunity. If it breaks below 4,000 points but without shrinking volume, there may be some back-and-forth.” The firm’s chief investment consultant said.

Another brokerage investment consultant pointed out that on Thursday, due to the impact of the Iran-U.S. situation, the market opened lower in the morning and the “4,000-point defense battle” began. The low point of the small C wave still has not been confirmed. Although the Shanghai Index may have a gap at 3,977 points to fill, if it probes further down again on Friday, short- and medium-term sentiment will hit an icy point resonance. That would be a rare signal for laying out an intermediate-term trading swing plan.

Zhang Gang said that given that domestic macro-policy guidance has become clearer, it provides a solid bottom-line support for the market. The central bank has clearly stated it will flexibly use reserve requirement cuts and interest rate cuts to keep liquidity ample, boosting confidence in the market’s subsequent performance. It is expected that the Shanghai Composite Index is more likely to remain in a period of modest consolidation and fluctuation.

On operations, Industrial Bank Securities reminded investors that at the core of dealing with volatility is to hold the anti-fragility bottom line and abandon an extreme “gambling” mindset. Do not deny your allocation logic because of short-term volatility, and even more so do not concentrate your bets on a rebound.

Specifically, Industrial Bank Securities advised investors: first, stick to diversified “core” holdings and anchor to your risk tolerance. Second, moderately lower the 2026 return expectations.

“With global geopolitical and policy uncertainties running high, China’s economic stability and policy predictability are globally scarce resources—there is no need to be overly pessimistic about domestic assets.” Industrial Bank Securities further noted that third, abandon irrational expectations and rebalance positions when the timing is right. Let go of the investment obsession of “only rising, never falling.” If your position ratio deviates from the target allocation, you can use market volatility to adjust and rebalance in multiple small steps. Then wait patiently for market sentiment to recover.

China Europe Fund said that global inflation, economic stagnation, and the tightening of the geopolitical situation have caused the market to see volatility gradually rising, under which the attention value of relatively lower-volatility assets has been gradually recovering. Therefore, it suggests focusing on three directions: first, traditional low-volatility dividends, especially the banking sector; second, technology whose fundamentals have seen a significant marginal improvement and has not yet been fully priced by the market, such as compute hardware like storage and optical communications; third, cyclical sectors driven by rising hedging demand whose prices are rising, such as oil and gas.