Middle East Reignites Uncertainty, U.S. Stocks Drop for 5 Consecutive Weeks! What’s Next for A-shares Tomorrow?

The recently concluded trading week (March 23 to 27) saw the A-share market experience some ups and downs.

The good news is that although the market overall still accumulated losses this week (as indicated by the Shanghai Composite Index, Wind All A Index, etc.), the weekly candlestick formed a long lower shadow, suggesting that it has likely passed the “most dangerous moment,” with sentiment showing signs of recovery.

Wind All A Weekly Candlestick

From the individual stock perspective, this week, 2,220 stocks closed higher, marking the “best” performance since March.

In terms of sectors, the lithium battery industry chain and other directions also showed a relatively sustained profit effect.

The bad news, however, is that the situation in the Middle East, which seemed to ease during Friday’s trading and briefly supported a stronger Asia-Pacific market, became complicated after the close, leading to a renewed sharp decline in U.S. stocks.

As of Friday’s close, the S&P 500 Index fell by 1.67%, the Nasdaq Composite Index dropped by 2.15%, and the Dow Jones Industrial Average decreased by 1.73%. Thus, the three major U.S. stock indices recorded five consecutive weeks of declines. Among them, the Nasdaq fell 3.23% this week, the S&P 500 dropped 2.12%, and the Dow Jones fell by 0.90%.

As of the time of writing, there are no clear signs of a resolution from the weekend news (which will be summarized below).

This essentially presents a dilemma for investors:

It is known that the market’s significant drop on Monday (also a three-day decline) was corrected over the following four days—“the bottom is confirmed” as a result.

Shanghai Composite Index Weekly Candlestick

So next week, will the market be affected by the weekend situation and perform another “bottom rebound”?

If so, will Monday’s script be “finding the bottom,” or will the correction be completed during the trading session itself?

If not, how long do you believe the seesaw effect of “oil prices rising while stocks fall” will continue?

Indeed, this is a short-term speculative point, but the strategy of “not predicting, only responding” is more suitable for many people at present.

To put it more bluntly, if the market needs to adjust further, we can also believe in the resilience of A-shares and act at the position most likely to find support (where a rebound is most probable), rather than impulsively chasing highs or selling out of emotion.

Guotai Junan Securities believes that since March, A-shares have experienced fluctuations and declines, going through a process of “adjustment—rebound—secondary decline.” The index trends are dominated by overseas factors, with the escalation of the U.S.-Iran conflict and stagflation trading being the main theme of the month; the resilience of the upstream in the technology sector stands out, while the energy chain in the cyclical sector shows strength; looking ahead, the short-term market may still face fluctuations, but there is no systemic risk of significant downturn, with structural aspects likely revolving around strong independent growth sectors.

Therefore, in terms of allocation, it is recommended to emphasize the defensive attributes of dividend assets and to layout recovery varieties after the marginal contraction of geopolitical risks.

Guosen Securities research report believes that this round of bull market began on September 24, 2024, with a macro backdrop similar to the bull market that started on May 19, 1999, both driven by macro policy efforts to combat deflation. Bull markets turning into bear markets often occur when the macro environment deteriorates and market sentiment is overly exuberant; currently, neither of these conditions is being met.

Compared to historical bull market peaks, the current bull market time and market sentiment have not yet reached extremes.

From the perspective of the upward time frame, the three typical bull market cycles mentioned earlier each lasted over 24 months, with the average increase of Wind All A at 151%; as of March 23, this round of market movement has only passed 18 months, with the increase of Wind All A at 58%, still leaving significant room compared to historical bull market timelines. From the perspective of market sentiment, as of March 23, the overall A-share PE was 21.7 times, and the risk premium rate was 2.8%, which still shows a certain gap compared to historical bull market peaks in 2007, 2010, 2015, and 2021, indicating that current market sentiment has not yet reached extremes.

So how should we understand this round of pullback?

According to wave theory, a bull market can be divided into five waves, with waves 1, 3, and 5 being upward waves, and waves 2 and 4 being correction waves; thus, the severe adjustments occurring in the mid-late stages of a bull market correspond to the 4th wave correction. From a technical analysis perspective, the “9.24” point of 2,689 on the Shanghai Composite Index in 2024 is the starting point of wave 1 of this bull market. The 3,040 point of the Shanghai Composite Index on April 7 of last year corresponds to the starting point of wave 3, while the market is currently likely in the phase of 4th wave correction. If we compare this bull market that originated from “924” in 2024 with the bull market from “519” in 1999, the adjustment since January 2026 may resemble the adjustment from August 2000 to February 2001.

“If the current low caused by geopolitical conflicts is the bottom area for the market for the year, from the perspective of volatility, there may be new highs ahead.”

Next, let’s take a look at the weekend news.

(1) The Middle East situation

On the evening of March 27, Beijing time, the news of “U.S. and Israeli airstrikes on Iranian steel and power plants” can be said to have directly triggered the decline in U.S. stocks. Earlier, the news that “Iran reported the return of three ships attempting to pass through the Strait of Hormuz” had already begun to cause market tension.

Here we summarize media reports and outline the subsequent timeline (as of March 29 morning, Beijing time).

(2) Other news

In response to energy market turmoil, Russia plans to implement a temporary ban on gasoline exports starting April 1.

In the first three months of this year, the total value of China’s innovative drug licensing transactions exceeded $60 billion, approaching half of the total for the entire year of 2025.

A key breakthrough has been achieved in the field of nuclear medicine in China.

The Institute of High Energy Physics at the Chinese Academy of Sciences has recently achieved the first mass production of medical-grade alpha isotopes at the curie level using the China Spallation Neutron Source, which will accelerate the transition of China’s self-developed alpha nuclear medicine from the laboratory to clinical application.

The search volume for the term “Token” reached a peak of 77,000 times in one day, which is 1850% higher than the average daily search volume last year.

Company Announcements

Great Wall Motors: Plans to use no more than 43.5 billion yuan of its own funds to purchase medium and low-risk financial products.

BYD: Plans to use no more than 60 billion yuan of its own idle funds for entrusted wealth management.

TCL Technology: Plans to use no more than 35.5 billion yuan of its own funds for entrusted wealth management in 2026.

Next week, the news will mainly focus on two major events.

March 31, Tuesday

March PMI data will be released.

Previously, data released by the National Bureau of Statistics showed that in February, the manufacturing PMI was 49.0%, down 0.3 percentage points from January; the non-manufacturing business activity index was 49.5%, up 0.1 percentage points from January; the comprehensive PMI output index was 49.5%, down 0.3 percentage points from January.

Analysts indicated that in February, seasonal factors were still impacting the manufacturing sector, leading to a slowdown in manufacturing operations; however, this slowdown is temporary, and positive changes are still accumulating. In March, as the impact of the Spring Festival holiday gradually fades and temperatures rise across the country, factories and construction sites will fully resume work, and the economic and social activities will return to normal operating tracks.

April 1, Wednesday

According to an announcement from the Ministry of Finance and the State Administration of Taxation, starting from this date, the VAT export rebates for photovoltaic and other products will be canceled.

Analysts believe that this cancellation of export rebates was already anticipated by the industry. The cancellation of export rebates will exert short-term pressure on exporting companies and will accelerate the inherent motivation for companies to carry out global capacity layout, thereby promoting China’s photovoltaic industry to gradually bid farewell to the “low-price competition” model and shift towards a high-quality development path of “technology pricing.” In the future, the penetration rate of advanced technology routes such as TOPCon 3.0, BC, and perovskite will accelerate, and the industry will enter a new development phase driven by technology.

(Source: Daily Economic News)