Recent anxieties surrounding the Hormuz Strait have unsettled global capital markets, triggering significant volatility not seen since the pandemic in countries like South Korea and Japan. China's A-share market has also experienced heightened fluctuations, with the Shanghai Composite Index briefly falling below the 3800-point mark. It is rational to recognize that the volatility in A-shares is primarily driven by trading dynamics. Since last April, the Shanghai Composite Index has surged from 3300 points to nearly 4200 points without a major correction. Factors such as profit-taking, crowded trades in high-valuation sectors, margin trading, and automated stop-losses from quantitative trading have all contributed to increased market swings.

From a fundamental perspective, A-shares are currently valued at historically low levels, with dividend yields significantly exceeding the risk-free rate. Both share buybacks and dividend payout ratios are on the rise, while trillions in fixed deposits are actively seeking higher yields. Global capital is also searching for safer havens. As a "certainty anchor" and "stability harbor" in the world, with the Chinese yuan appreciating gradually, A-shares are poised to attract global risk-off capital.

Moreover, investors should not be held hostage by Hormuz Strait anxieties. The global crude oil market remains in a state of oversupply, lacking a fundamental basis for actual shortages. Investors should avoid overreacting to geopolitical conflicts. Notably, during the two oil embargoes of the 1970s—a period marked by soaring inflation and unemployment, with interest rates reaching double digits—Warren Buffett maintained a fully invested portfolio. Buffett famously said, "Every decade or so, dark clouds will fill the economic skies, and they will briefly rain gold. When downpours of that sort occur, it’s imperative that we rush outdoors carrying washtubs, not teaspoons." For investors, such adversities often lead to extremely low stock valuations, creating buying opportunities that are temporary. Panic is the greatest enemy of investing; maintaining discipline is crucial. As seasoned investors believe, if the sky were truly falling, no action would matter—so why not buy stocks while they are cheap?

Four key factors have intensified recent A-share volatility: First, the 2.6 trillion yuan in margin trading is highly sensitive to market swings; declines force some margin traders to sell, amplifying volatility. Second, 2 trillion yuan in quantitative funds automatically execute stop-loss orders during fluctuations, and concentrated selling exacerbates price moves. Third, certain high-flying sectors face elevated valuations and crowded trades; when sentiment shifts, selling can be rapid, affecting the broader market. Fourth, with a decade having passed since A-shares' last peak in 2015, memories of downturns have faded. New investors entering the market exhibit limited tolerance for losses. However, these are merely trading-related disturbances and do not undermine A-shares' investment value.

A-share valuations are at historic lows, with many sustainable, low-disruption heavy-asset companies offering stable long-term dividend yields. As of March 27, the Shanghai Composite Index's forward P/E ratio stood at 16.52 times, with a dividend yield of 2.54%. The Dividend Index showed a forward P/E of 8.86 times and a yield of 4.32%, while the SSE 180 Index had a forward P/E of 11.92 times and a yield of 3.27%. On a yield basis, major asset classes are comparable: equities offer an approximate annualized return equal to the dividend yield plus economic growth, currently around 8%. In contrast, the 10-year government bond yields 1.8%, bank deposits offer about 2%, and rental yields in first-tier cities are around 2%. However, equity returns are realized over the long term amid volatility.

Assets like gold and Bitcoin have recently weakened, as non-yielding assets are purely speculative; their peaks often coincide with peak conflict. In contrast, "hard assets" with stable dividends have inherent floors. During intense conflicts, stock price lows may already be in the past, as declines only make already attractive companies more appealing. Against a backdrop of stable Chinese economic growth, gradual yuan appreciation, and ample liquidity, investor anxiety over the Hormuz Strait may be overdone. Yi Yingnan, a researcher at the Chongyang Institute for Financial Studies at Renmin University, recently noted that U.S. strategic constraints preclude prolonged escalation of conflict. With global oil supply in surplus and China having diversified import sources over the past decade, reliance on any single supplier has steadily declined.

Cheapness is the ultimate rationale. Recent Middle Eastern tensions have evoked memories of the 1970s oil embargoes, which severely impacted the global economy, leading to stagflation in the U.S. with double-digit inflation, interest rates, and near-double-digit unemployment. Yet, Warren Buffett remained fully invested throughout both embargoes. During the first embargo starting in October 1973, Buffett—who had exited overvalued U.S. stocks in 1969—returned to the market. Eager to buy more stocks than his capital allowed, he even borrowed to increase his investment. In 1973, he invested $10.62 million to acquire a 9.7% stake in The Washington Post, whose intrinsic value was around $400 million but whose market cap was just $100 million. This classic investment later yielded hundredfold returns.

Investing is counterintuitive; when stocks are cheap, a host of difficulties often deter buyers. Yet, in hindsight, cheapness proves decisive. Acting against the crowd during market panic requires immense courage. The 1940 book "Where Are the Customers' Yachts?" described Wall Street during the 1929 crash. Its author observed that one could not expect seasoned Wall Street professionals to buy stocks when shipping volumes hit new lows, unemployment peaked, steel output halved, and a prominent figure confidently warned of a major Midwest underwriter's collapse. "Unfortunately for everyone, that is the only time stocks are low." Over the long term, the market rewards such courage and patience.

The late global "contrarian investing master" John Templeton posed a key question in his youth: "How can I buy stocks at extremely low prices?" His answer: "Nothing else but an urgent need to sell can drive a stock down to a bargain price." This insight led him to borrow money to buy $10,000 worth of stocks during the toughest phase of World War II, selling them four years later for a threefold gain.