Adjust the market first to avoid defeat; breaking through depends on it?

This week, the A-share market experienced a correction. Among the nine major broad-based indices, all but the ChiNext Index closed in the red for the week. Especially with the sharp market decline on Friday and the breaking of the support level in the Shanghai Composite Index, many are worried about next week’s market trend.

So when will the market stop falling? What should we pay attention to during this correction? Today, Da Ge and Niu Bo Shi discuss the questions everyone is concerned about.

Niu Bo Shi: Da Ge, hello. It’s weekend again, time to talk about the market. This week, the A-share market corrected, and overseas markets were also unsettled. The Middle East situation remains uncertain. What are your thoughts on next week’s market?

Dao Da: Over the weekend, some important news has emerged.

On March 20, the People’s Bank of China (PBOC) raised the macro prudential adjustment coefficient for domestic enterprises’ offshore loans from 0.5 to 0.6, increasing the overall offshore loan balance limit.

From October 2022 to January 2025, the PBOC has adjusted the macro prudential parameters for cross-border financing three times. Shortly after each adjustment, offshore RMB exchange rates experienced a phase shift and a noticeable appreciation.

On March 22, PBOC Governor Pan Gongsheng stated that the central bank will continue to implement moderately loose monetary policy. It will use a combination of tools such as reserve requirement ratios, policy interest rates, and open market operations to maintain ample liquidity.

The governor’s remarks seem to reassure the market.

However, the Middle East situation, which influences global markets, remains uncertain.

Trump is considering gradually downgrading military actions against Iran, while Iran’s foreign minister seeks a complete end to the war rather than a temporary ceasefire.

Although there are signs of de-escalation in the Middle East, both the US and Iran have issued tough statements afterward.

Trump threatened Iran, demanding that Iran open the Strait of Hormuz within 48 hours or face destruction of its power plants; Iran warned that if its energy facilities are attacked, it will strike key US and allied facilities.

This round of global market adjustments is somewhat related to the Middle East situation, which was previously underestimated in its impact. The ongoing tension has also increased expectations that the Federal Reserve may halt interest rate cuts.

In the early hours of March 19, Beijing time, Fed Chair Powell’s speech conveyed a hawkish tone, leading to a correction in US stocks on Friday.

Regarding market trends, I mentioned in my Thursday article that the CSI 500, CSI 1000, and the National Stock Exchange 2000 indices broke below their upper support zones, which could serve as guidance for other indices. As a result, the Shanghai Composite Index also broke below its February lows on Friday, effectively breaking the stage bottom.

Since the Shanghai Composite Index has a significant influence on the overall market, its break indicates a downward search for support and suggests that the correction and consolidation phase may be prolonged.

Support levels are currently around 3,800 to 3,930 points. Due to investor anxiety over the weekend, there is a high probability of an initial downward inertia on Monday.

In 2025, the Shanghai Composite Index recorded five major lows, three of which occurred on Mondays: January 13 at 3,140 points, April 7 at 3,040 points, and November 24 at 3,816 points.

The other two lows appeared on September 4 and December 16, the former during the decline of AI hardware, and the latter during a secondary bottoming process.

All these significant lows occurred after market fears were released, indicating that if there is an initial decline tomorrow, there is a certain chance of forming a temporary bottom.

However, since the Shanghai Composite Index broke below the February stage bottom, even if a bottom is formed tomorrow, the subsequent trend is likely to be weak consolidation or slight recovery. Therefore, overall positions should not be too heavy, and trading should mainly follow one’s own strategy.

Whether the market can turn around significantly depends on the ChiNext Index.

Since the gap-up rally on March 10, the ChiNext Index has mostly been consolidating sideways, reaching a new high on Friday.

If the ChiNext Index can make a new high and stay above the recent half-year trading range, it would have a positive impact on the market. Conversely, if it fully fills the gap from March 10, it indicates the market is entering a weak phase, and aggressive trading is not advisable.

Niu Bo Shi: Thanks for Da Ge’s insights. Hopefully, the market can stabilize and stop falling tomorrow. What should we watch for next week in terms of opportunities?

Dao Da: I previously mentioned that the market is showing similar patterns to the post-Ukraine conflict period, including sectors like chemicals and new energy.

Currently, the chemical sector has played out and is temporarily pausing, while the new energy sector is still ongoing, such as photovoltaic inverters and new energy battery chains performing well.

Historically, after the spring rally, the market tends to correct, but during this correction, new opportunities often emerge. For example, in 2022, resource and new energy sectors led; in 2023-2024, AI-related themes gained prominence; and in 2025, the theme of price increases is expected to rise.

Therefore, the key is to observe whether new sectors can emerge.

Looking at sector performance, the electrical equipment and coal sectors recently hit new highs. The former is driven mainly by overseas demand, and the latter by dividends.

High-growth sectors with modest gains and dividend-oriented sectors should be watched for potential rallies.

On the news front, next week will host the 11th Perovskite and Tandem Battery (Yangtze River Delta) Industrialization Forum and the First Space Photovoltaic Technology and Application Innovation Forum.

To conclude, Da Ge summarizes: The Shanghai Composite Index broke below its February stage bottom on Friday, indicating that support will be sought downward, and the correction and consolidation period will be extended. Tomorrow, there may be inertia-driven declines. Next week, focus on whether the Shanghai Composite Index can stabilize and whether the ChiNext Index can take the lead in breaking the market deadlock.

In terms of trading, avoid being aggressive, keep positions light, and mainly trade within your own strategy. Maintain a calm mindset during market fluctuations. If your trading skills are limited, prioritize defense—aim for avoiding losses first, then seek gains.

(Editor: Zhang Yang HN080)

【Disclaimer】This article reflects only the author’s personal views and has no relation to Hexun.com. Hexun.com remains neutral regarding the statements and opinions expressed herein and does not guarantee the accuracy, reliability, or completeness of the content. Readers should use this as a reference and bear all responsibilities themselves. Email: news_center@staff.hexun.com