Weekly Report on Stock Index Futures: A-shares contract volume shrinks with initial decline followed by recovery, most futures basis narrowing

(Source: Haizheng Futures Research Institute)

Abstract

This week, the A-shares experienced a decrease in trading volume and a downward trend, with the average daily transaction volume across the market at 2.11 trillion yuan, down approximately 99.6 billion yuan compared to last week, indicating a continuous decline in market trading activity. The three major indices collectively closed lower, with the Shanghai Composite Index dropping by 1.09%, closing at 3913.72 points. The divergence among major broad-based indices was significant, with the Shanghai 50 declining by 1.61% weekly while the CSI 2000 rose by 0.35%. After a sharp decline on Monday, small-cap stocks rebounded more significantly.

On the stock index futures front, the overall average daily trading volume of futures contracts decreased compared to last week, as trading sentiment in the futures market cooled following the spot market. After excluding expected dividends, the weighted annualized basis rates for futures contracts showed that the end-of-period holdings for IH, IF, IC, and IM (dividend adjusted) were -1.02%, -4.63%, -7.08%, and -10.08%, respectively, changing -1.07%, -0.07%, 1.02%, and -0.85% from last week.

From a valuation perspective, the PE ratios of various indices changed differently. The end-of-period PE ratios for the Shanghai 50, CSI 300, CSI 500, and CSI 1000 were 11.28 times, 13.93 times, 35.54 times, and 47.85 times, respectively. Except for the Shanghai 50, all were above the 80th percentile level for the past five years. Regarding liquidity and capital situation, as of this Thursday, the end-of-period yield for the 10-year government bond was 1.82%, down 1 BP from last weekend; the end-of-period yield for the 1-year government bond was 1.26%, unchanged from last weekend. The long-short interest rate spread for government bonds decreased by 1 BP compared to last weekend. The market liquidity environment remains relatively loose. In terms of financing data, as of this Thursday, the financing balance was 2.62 trillion yuan, with a net financing inflow of -16.1 billion from Tuesday to Thursday, indicating a decline in capital participation sentiment.

In terms of economic fundamentals, in January-February 2026, the fiscal data showed that public finance revenue turned from negative to positive on a year-on-year basis, and the growth rate of expenditures significantly increased. Regarding industrial enterprise profits, the total profit growth rate on a year-on-year basis surged compared to the end of last year, while industrial added value and revenue profit margins supported profit growth.

Overall, the A-shares exhibited a significant decline followed by a corrective recovery this week, with weak capital participation sentiment. The geopolitical conflict in the Middle East remains a core variable disturbing the market: following the escalation of the conflict over the weekend, the A-shares opened significantly lower and continued to drop on Monday; from Tuesday to Thursday, as the situation eased somewhat, the market gradually rebounded, but failed to fully recover losses. Structurally, the price increase line represented by energy and chemicals continued to be strong, becoming an important support for the market. In terms of domestic fundamentals, the profit data for enterprises in January-February showed significant improvement, indicating that the momentum for economic recovery is accumulating. Looking ahead, uncertainties in overseas geopolitical situations will continue to disturb market risk preferences, and short-term market volatility is expected to remain at a high level.

Main Text

Analyst Introduction

Tang Cuiting (Trading Consultant No.: Z0021179): Financial Engineering Researcher at Haizheng Futures Research Institute, Bachelor of Economics and Management from Southwest University of Finance and Economics, Master’s in Finance from Tongji University, mainly responsible for research on stock index futures, options, and other varieties.

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