The Shanghai Composite Index declined by 6.51% in March, marking the largest single-month drop in over four years. Is the bottom in sight?

Ask AI · How will the Middle East conflict affect China’s A-share market’s sharp selloff in March?

Our reporter from chinatimes.net.cn, Shuai Kecong, Beijing

On March 31, 2026, the three major A-share indexes all moved in choppy trading and fell collectively. The Shanghai Composite Index closed down 0.8%, slipping below the 3,900-point level; the ChiNext Index plunged 2.7%; and more than 4,300 stocks across the market finished in the red.

Data from Wind shows that over the entire month of March, the Shanghai Composite Index fell cumulatively by 6.51%, the largest single-month drop since February 2022. However, among major global stock markets, the decline was relatively smaller. South Korea’s KOSPI Composite Index fell 19% cumulatively in March, leading the declines among major global benchmarks, while Japan’s Nikkei 225 and Germany’s DAX 30 also fell by more than 10% in March.

Yang Delong, chief economist at Qianhai Open-Source Fund, told reporters from 华夏时报 that this round of correction in A-shares was mainly driven by an external shock from the Middle East conflict, which caused fluctuations in investor sentiment, and did not change the overall pattern of A-shares’ long-term slow bull and long bull market. As the effects of capital entering the market in the medium and long term gradually become visible, the market ecosystem for long-term investment continues to improve, and A-shares are gradually building bottom-type characteristics. Ironically, market corrections are a good time to enter.

The Shanghai Composite Index again falls below 3,900 points

On March 31, A-share’s three major indexes opened mixed, rising slightly early on before rapidly retreating. The decline widened noticeably into the close, and all of them ended the day at their intraday low points.

As of the close that day, the Shanghai Composite Index fell 0.8% to 3,891.86 points, slipping below the 3,900-point threshold; the Shenzhen Component Index fell 1.81% to 13,478.06 points; and the ChiNext Index dropped 2.7% to 3,184.95 points. In addition, the CSI 300 Index fell 0.93%, the North Certificate 50 Index fell 0.99%, and the STAR 50 Index fell 2.59%.

From the intraday market picture, most of the 31 Shenwan first-level industry sector indexes fell, with only Home Appliances, Banking, and Food & Beverage rising—up 1.57%, 0.72%, and 0.23%, respectively. Coal, power equipment, and electronics led the declines, falling 3.67%, 3.21%, and 2.71%, respectively.

Total turnover across A-shares for the whole day was about 2 trillion yuan, an increase of more than 78 billion yuan compared with the previous trading day. At the market close, 4,378 stocks fell, including 17 that hit the daily limit down; only 1,011 stocks rose, including 59 that hit the daily limit up.

From the flow of funds from the main market participants, the top three sectors by net inflow were consumer electronics, advertising and marketing, and precious metals, with net inflows of 20k yuan, 1.02 billion yuan, and 1.54B yuan, respectively; the top three sectors by net outflow were semiconductors, batteries, and communication equipment, with net outflows of 914M yuan, 11.29B yuan, and 9.05B yuan, respectively.

It is worth noting that Guizhou Moutai’s share price rose more than 2% to 1,450 yuan per share. Its latest market cap was about 1.8 trillion yuan. Early on, it once surged by more than 4%. On the evening of March 30, Guizhou Moutai announced that starting March 31, the contract price for its 53-degree Feitian Moutai liquor would be adjusted from 1,169 yuan per bottle to 1,269 yuan per bottle, and the retail price in its self-operated channel would be adjusted from 1,499 yuan per bottle to 1,539 yuan per bottle. The price adjustment is expected to have some impact on the company’s operating performance.

Guo Yiming, director of investment consulting at Grand Feng Investment, analyzed for reporters from 华夏时报 that recently A-share trading has continued to shrink, staying around 2 trillion yuan. Insufficient trading volume has become a key factor constraining the market’s sustained upward momentum, and he expects that in the short term, the overall market will likely remain mainly in a range-bound, consolidating pattern.

However, Guo Yiming believes that from the perspective of support, multiple positive signals provide resilience for the market: Guizhou Moutai announced a price increase and its stock performance was strong. As a leading blue-chip weight stock, it provides some support to the broader market and also helps the liquor sector warm up overall. The latest PMI data for manufacturing returned to the expansion territory, ending the two consecutive months of contraction, and resonated with non-manufacturing and the composite PMI index, confirming a substantive improvement in economic conditions. At present, the market is in a dense period of annual report and quarterly report releases; stocks with earnings above expectations are likely to gain favor from funds and become an important driver for market repair.

Institutions say A-share valuations are at a reasonable level

Affected by the Middle East geopolitical crisis, major global stock markets saw declines of varying degrees in March.

Across the entire month of March, the Shanghai Composite Index fell cumulatively by 6.51%, the Shenzhen Component Index fell cumulatively by 7.02%, and the ChiNext Index fell cumulatively by 3.79%. Among them, the Shanghai Composite Index recorded the largest single-month decline since February 2022, and the Shenzhen Component Index recorded the largest single-month decline since February 2024.

Despite this, compared with other major global stock markets, the performance of China’s A-share market was still relatively better. According to Wind data, across the entire month of March the KOSPI Composite Index in South Korea fell cumulatively by 19%, and Japan’s Nikkei 225 fell cumulatively by 13%. Both reached their largest single-month declines since November 2008.

In addition, as of the close on March 30, the U.S. S&P 500 Index fell 7.8% in March cumulatively, the largest single-month decline since October 2022. Germany’s DAX 30 Index fell 10.8% cumulatively, the largest single-month decline since July 2022. France’s CAC 40 Index fell 9.4% cumulatively, the largest single-month decline since April 2020.

Yang Delong believes that the ability of China’s A-share market to break into an independent trend recently shows that the logic behind this round of slow bull and long bull is very strong. The impact of the geopolitical conflict on A-shares is gradually weakening. The core factors affecting A-shares are China’s domestic economic fundamentals, risk appetite, and the level of interest rates. At present, these factors have not undergone fundamental changes, and A-shares in the medium and long term remain on a structural, gradual upward trend.

People related to Star Stone Investment told reporters from 华夏时报 that in the short term, A-shares will most likely track fluctuations in global risk assets, and at the micro level, the impact of overall market performance and sector rotation on the stock market remains relatively strong in phases. Whether the Middle East conflict becomes clearer is an important factor for whether the market’s trend will change.

Meanwhile, the source said that although in the short term the Middle East conflict still has uncertainty, after going through the adjustment, A-share valuation risk has been released further. At present, A-share valuations are at a relatively reasonable level. Considering China’s manufacturing strengths are evident, and that technological upgrades and application rollouts in the artificial intelligence field are still progressing, the broader “pan-technology” area still has good opportunities for earnings realization. Overseas uncertainty has little impact on domestic policy efforts to spur the economy, and there are also mid-term opportunities for stable, high value-for-money Chinese core assets to be explored.

Lin Yang, an analyst at Dongxing Securities, said that the Middle East conflict’s high-intensity duration is not sustainable. Focus on risk hedging and value-type companies in the interim. Once it enters a negotiation critical point, a pullback in oil prices would ease inflation, and if money remains loose, funds would return to the stock market. As valuations repair, the market would return to growth-type companies, and attention would shift back to fundamentals and the direction of business conditions.

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