Despite a volatile week, the A-share market demonstrated underlying resilience. Major broad-based indices generally closed lower. The Shanghai Stock Exchange 50, the Shanghai Composite Index, and the CSI 300 experienced relatively modest declines, while the ChiNext Index, the STAR 50 Index, and the CSI 500 saw larger drops. From a valuation perspective, indices such as the STAR 50 and the Wind All-A Index currently trade at relatively high historical percentiles. As of April 3, 2026, their price-to-earnings ratios are above the 85th percentile compared to levels since 2010.
A review of key events from the past week shows significant policy and industry developments. On the policy front, nine government departments jointly issued the "Action Plan for Promoting Innovative Development of the Internet of Things Industry (2026-2028)". The plan outlines five major measures, including promoting innovation in IoT devices, enhancing IoT platform services, cultivating application scenarios, strengthening the IoT network infrastructure, and fostering a healthy industrial ecosystem. Separately, the General Office of the State Council issued an implementation plan for establishing a comprehensive corporate credit evaluation system, aiming to improve the public credit assessment framework.
Industry news included a report from the Zhongguancun Energy Storage Industry Technology Alliance, which projected that global cumulative battery energy storage capacity will surge by 8 to 17 times between 2024 and 2035. Data from the China Index Academy indicated that the total sales of the top 100 real estate enterprises from January to March 2026 amounted to 620.87 billion yuan, with the year-on-year decline narrowing by 3.7 percentage points compared to the January-February period. Meanwhile, the Ministry of Commerce announced that it, along with the National Development and Reform Commission and the Ministry of Finance, has commenced the purchase of central government frozen pork reserves. Internationally, reports cited by Iranian media on April 2 suggested that Iran and Oman plan to jointly monitor shipping traffic in the Strait of Hormuz. On the same day, reports from the UK indicated that Gulf countries are reconsidering the construction of a pipeline bypassing the Strait of Hormuz to maintain oil and gas exports. Recently, former US President Trump again threatened strikes on Iranian facilities.
Despite the volatility, the market's inherent toughness remains intact as investors await potential catalysts. Three potential turning points for the market are identified. Although the domestic market is inevitably affected by oil price fluctuations and a short-term decline in risk appetite, China's high degree of energy self-sufficiency provides some buffer against sustained external energy price increases. Furthermore, historical patterns suggest that domestic exports often benefit from rising external uncertainty, likely due to the stability of the domestic supply chain. Therefore, from a medium-term perspective, Chinese assets possess intrinsic stability and are expected to continue attracting capital inflows. Looking ahead to April, potential market catalysts may emerge from three areas: 1) Better-than-expected corporate earnings. The release of 2025 annual reports and 2026 first-quarter reports for listed companies is expected to show a slight overall improvement in performance. Structurally, technology innovation and cyclical sectors may show particular strength, and any positive earnings surprises could support market gains. 2) Inflows from long-term institutional investors. Continued policy support for long-term capital market participation, combined with recent market pullbacks, may again attract such funds, helping the market to bottom out and recover. 3) A moderation in external risk factors. An easing of previously identified risks represents one of the most direct potential catalysts for an upward move, although its predictability is relatively low.
From a sector perspective, attention is advised on previously oversold areas, industries that may benefit from rising commodity prices, and sectors with potential for positive earnings surprises. Since the escalation of US-Iran tensions, sector performance has diverged significantly, with two types of sectors experiencing the most pronounced adjustments: one is the previously high-flying growth-oriented sectors, and the other is resource-related sectors where product prices have been significantly impacted. Should a market reversal occur, these two categories could potentially deliver stronger performance. Concurrently, sectors likely to benefit from rising commodity prices are worth monitoring, including resources, consumer staples, hard technology, and areas related to government investment. Additionally, industries showing high growth rates in annual and quarterly reports deserve close attention, likely concentrated in resource and technology-related fields.
Risk factors include: 1) Policy implementation progressing slower than anticipated; 2) A significant deterioration in market sentiment; 3) Economic growth falling substantially short of expectations; 4) A major worsening of Sino-US relations; 5) A continued escalation of tensions in the Middle East.