Core Asset Support Falls Short as Shanghai Index Breaks Below 4000 Points

On Friday, March 20th, A-shares broke below support levels and tested lows. By the close: the Shanghai Composite Index closed at 3,957.05 points, down 49.50 points, a 1.24% decline; the Shenzhen Component Index closed at 2,589.10 points, down 30.85 points, a 1.18% decline; the STAR Market Composite Index fell by 1.15%; the SME Board Composite Index dropped by 1.37%; and the ChiNext Index declined slightly by 0.68%. The total trading volume of A-shares was 2,302.825 billion yuan, an 8% increase compared to Thursday.

Throughout the day, after the major indices opened, the bulls attempted to rally by boosting the ChiNext Index components, which temporarily rose by 3.55% intraday. However, the sharp rise in core assets caused individual stocks to accelerate their decline, and continuous selling pressure led all major indices to fall sharply after the afternoon open, closing at lows. As a result, the Shanghai Composite Index broke below the 4,000-point level and the 120-day moving average.

According to Tongdaxin statistics: the ratio of advancing to declining stocks was 662:4,786; the proportion of stocks with gains or losses exceeding 10% was 36:27; and those with gains or losses over 5% was 87:489. The market showed that underperforming stocks continued to be the main area of short-selling, with *ST Wanfang hitting the daily limit down for 16 consecutive days; *ST Jinlun has been below its face value of 1 yuan for 7 days straight, with 31 of the last 33 trading days hitting the limit down; ST Dahua hit the limit down for 4 consecutive days, and *ST Guohua for 5 days. Moreover, micro-cap stocks, recent IPOs, and low-priced stocks, which lack competitiveness, saw average declines of 3.68%, 1.67%, and 2.58%, respectively.

Looking ahead, Jiangnan Avenue Chief Advisor Tang Hewen of Galaxy Securities provided the following analysis:

Technically, the Shanghai Composite Index has recently lost the 90-day, 120-day moving averages, and the 4,000-point level for two consecutive days, also filling the gap at 3,977 points. The pattern has formed a “pseudo double top” without a measured decline, indicating a clear sign of a breakdown. Meanwhile, whether on the Shanghai and Shenzhen main boards or the ChiNext, core asset stocks surged intraday, but collective risk release led to failed support efforts, which is unfavorable for both short-term and medium- to long-term outlooks. If the index cannot recover the 4,000-point level next week, the downside potential may increase further. Since the major indices are just breaking down from high levels, investors should avoid rushing to buy the dip at this moment. For those with holdings, a strong rebound next week should be viewed as an opportunity to cut losses.

After the market undergoes sufficient adjustment, opportunities may arise for buying on dips, with key sectors including industrial and electrical equipment, utilities, materials and non-ferrous metals, real estate, discretionary consumption, and healthcare.

(Note: The opinions expressed are for reference and discussion only and do not constitute investment advice; the stock market involves risks, invest cautiously.)

Reporter: Wang Ye, Shangyou News