The volume bottleneck needs to be broken; A-shares may face a directional choice next week.

This week, the A-share market overall showed a corrective trend. The major indexes generally closed lower, but beneath the surface, there was undercurrent activity within the market, and the divergence in performance was especially pronounced.

The Shanghai Composite Index fell 1.10% for the week. After finding support in the 3850-point area, it rebounded on Friday, ultimately closing at 3913.72 points, indicating a certain level of resilience. The Shenzhen Component Index and the ChiNext Index fell 0.76% and 1.68%, respectively. By comparison, small-cap style indexes were more active: the STAR Market 200 and the CSI 2000 indexes rose against the trend by 0.88% and 0.35%, respectively, showing that market style clearly tilted toward stocks with smaller market caps.

In terms of trading volume, this week sentiment in market trading cooled somewhat. On Thursday and Friday—two consecutive trading days—turnover was under 2 trillion yuan, indicating that amid the interplay of internal and external factors, investors’ wait-and-see sentiment was strong.

Judging from the driving factors, this week’s pullback was mainly triggered by shocks from external geopolitical risk. The Iran-Iraq conflict has continued for a month, and the situation is still characterized by a complex scenario of “fighting while negotiating.” Looking at this week specifically: on one hand, Israel launched an airstrike that killed the Iranian Islamic Revolutionary Guard Corps Navy commander, and Iran responded by launching a “True Promise-4” operation against U.S. military bases, escalating the standoff between the two militaries. On the other hand, the United States proposed a ceasefire plan through intermediaries that includes 15 conditions, and Iran responded with five “must-have” conditions; afterward, the U.S. announced that it would delay airstrikes on Iran’s energy facilities.

This kind of extreme standoff caused major volatility in global commodity markets, with investors’ concerns about energy supply security and inflation expectations notably increasing. In addition, technical patterns for major indexes weakened, and with A-shares about to enter a period of concentrated earnings releases, the market’s cautious attitude toward earnings uncertainty further suppressed risk appetite.

However, amid the gloom across the overall market, structural opportunities remain prominent, and some sectors strengthened against the trend.

The nonferrous metals industry led with a gain of 2.78%. Geopolitical risk generated safe-haven demand, supporting prices of gold and other precious metals. At the same time, at the end of February, the Zimbabwean government announced an indefinite suspension of all exports of raw ore and lithium concentrate; the ban has been in place for nearly a month with no sign of being lifted yet, intensifying disruptions on the lithium ore supply side. In addition, there has been a material contraction in aluminum supply in the Middle East; the continued blockade of the Strait of Hormuz has created pressure on the local aluminum industry chain, further strengthening concerns about the supply of industrial metals.

The utilities sector also performed steadily, with a weekly gain of 2.50%. Backed by its stable cash flows and defensive characteristics, it became a haven for capital during the market adjustment period. From a fundamental perspective, in January and February, total electricity consumption across society increased by 6.1% year over year; thermal power generation rose from decline to growth, while coal prices fell both year over year and month over month over the same period—an improvement on the cost side combined with a rebound in generation volume, leading some thermal power companies’ earnings expectations to rise. On the policy front, the National Data Bureau stated clearly that it will strongly promote the compute power and power mutual-support engineering, ensuring that the share of green power applications for newly built compute capacity facilities at hub nodes reaches above 80%, making the outlook for green power utilization even clearer.

The basic chemical industry rose 2.31% for the week. Benefiting from cost push driven by higher international crude oil prices, together with the concentrated release of domestic spring plowing and fertilizer preparation demand, it jointly supported an upturn in the agricultural chemicals industry chain’s overall conditions. The National Development and Reform Commission issued a notice requiring efforts to ensure supply stability and price stabilization for spring farming fertilizers. Major pesticide varieties such as glyphosate and glufosinate saw price increases, and market supply showed tightness.

The pharmaceutical and biotech sector climbed 1.56%, mainly driven by strong policy-level catalysts. In the 2026 “Government Work Report,” biological medicines and related industries were listed as an emerging pillar industry for the first time, and the industry positioning clearly moved up. From an industry perspective, cross-border expansion of innovative drugs is accelerating, and some leading companies released annual reports showing their first full-year profitability, breaking the market’s preconceived notion about innovative drug companies. This has become an important catalyst for valuation recovery in the sector.

Looking ahead, in the short term, the upward gap above the Shanghai Composite Index has not been fully filled yet. The market may attempt to organize a rebound next week, but the quality of the rebound will depend highly on whether trading volume can cooperate. If turnover cannot be effectively expanded, the market may still mainly deliver a structural行情; capital may rotate between defensive sectors and cyclical sectors with relatively high levels of business momentum.

In the medium term, the market does not lack positive factors. From January to February, the profits of industrial enterprises above a designated size across the country grew 15.20% year over year, indicating a good trend in economic recovery. The draft financial law clearly proposes support for the entry of medium- and long-term funds into the market, providing rule-of-law backing for stability in capital markets. From a valuation perspective, undervalued assets are more likely to attract incremental capital. After experiencing adjustments, upstream resource products and some manufacturing leading firms have relatively ample room for valuation recovery.

From a strategy standpoint, the market generally believes that layout opportunities are being cultivated during the adjustment, but caution is still needed in the short term.

Industry allocation focuses on two main themes:

First, upstream resource products and the price-increase chain. Geopolitical conflicts raise global concerns about energy security. Nonferrous metals and basic chemicals benefit from supply-demand mismatches and cost-driven factors, and the price-increase trend is expected to continue.

Second, high-visibility manufacturing and defensive sectors. The logic of the overseas expansion of the新能源产业链 remains strengthened. Utilities have steady cash flows, and the policy level for pharmaceutical and biotech has moved up. In addition, the AI hardware direction is also worth focusing on—as AI large model iterations accelerate and penetrate the application layer, demand for compute power continues to expand. The business conditions in sub-sectors such as servers, optical modules, and PCBs are expected to remain at high levels, and accelerated localization substitution also provides incremental room for related industry chains. The financial sector’s valuations are at historical lows, and under expectations of policies supporting market stability, there is room for recovery.

**In terms of execution, it is recommended to adopt a “dumbbell-type” allocation approach—**on one side, allocate to defensive assets; on the other, allocate to directions with high upside elasticity. Manage overall position sizing, avoid chasing rallies blindly, seize market volatility to enter at relatively low levels value-adjusted quality targets with solid fundamentals, and closely monitor the evolution of geopolitical situations as well as the performance verification during the earnings season to respond to potential volatility.