Asia-Pacific stock markets come under pressure again on Tuesday. How will the A-shares perform in the second quarter?

On Tuesday, major stock indexes in Asian markets faced renewed collective pressure.

As of the close on March 31, the Nikkei 225 index fell 1.58% to 51063.72 points, while the KOSPI index in South Korea dropped even more sharply, down 4.26% to 5052.46 points. The Shanghai Composite Index fell 0.8% to 3891.86 points; the Hang Seng Index closed up 0.15%.

In terms of trading volume, the total trading value on the Shanghai and Shenzhen markets was 1.99T元, up 76.6B元 from 1.92T元 on the previous trading day.

Regarding the market pullback, an investment consultant at a brokerage firm said: “On Tuesday, there are two characteristics: first, trading volume has been hovering around 2 trillion for some time, resulting in a contraction in volume. Second, high-dividend stocks are clearly strengthening. Based on the performance that has already been released, some companies saw significant quarter-on-quarter declines in Q4 data, including some consumer-related, and even export-oriented companies. We hope for a rebound in the first quarter, and if the market falls too much, there may also be some repair in April.”

Another analyst pointed out that on Tuesday the three major indexes initially moved higher together at the open; however, after they were unable to fill the gap near the top for a long time, some short-term funds began to cash out in aggregate, which then led the three major indexes to turn green collectively and continue to fall. However, from the big-picture trend, the upward trend of the three major indexes at the weekly level has not been broken, and the M10 at the monthly level also shows strong support.

A research note from West China Securities (华西证券) believes that weak volume and liquidity is the key feature of the current market. From last Thursday to this Monday, the total trading value across the whole market has been below 2 trillion yuan for three consecutive days, indicating that market disagreement is shrinking. Whether funds are in a wait-and-see mode or bullish, most are taking a holding approach. With relatively few floating shares, if the bulk of the chips are concentrated in short-term trading funds, the market typically can be lifted quickly. But recently the market has been neither hot nor cold, meaning most of the chips may be held by medium- to long-term allocation funds. When volume and liquidity decline to the extreme, a rebound is possible. However, even if a rebound occurs, the pace may be relatively mild, making it unlikely to see a situation of rapid gains.

That said, Chinese assets showed more resilience in March than the stock markets of Japan and South Korea. According to wind data, in March the Nikkei 225 index fell 13.23%, while South Korea’s KOSPI index dropped even more sharply, down 21.486%. The declines in the Shanghai Composite Index and the Hang Seng Index in March were both around 6%.

With the trading window for the second quarter about to begin, will the resilience of Chinese assets continue?

Wang Han (王涵), Chief Economist of Industrial Securities and Co-Director of the Institute of Economic and Financial Research, said that for asset allocation in the second quarter, on the strategic level, A-shares should not be overly pessimistic and have clear support. On the tactical level, it is necessary to face the increased volatility in the market and stick to a contrarian operating mindset. Capital markets naturally dislike risk, and A-shares are especially sensitive to it.

In a research view published by the investment director office (CIO) of UBS Wealth Management, the firm believes that the current adjustment in the Chinese market may already be excessive, and investors have an opportunity to add quality Chinese AI stocks at lower valuations. Over the next 12 months, China’s internet industry forward P/E is around 13 times, which is close to the level before DeepSeek was released; the current valuation has not yet fully reflected the benefits from AI investments and monetization over the past year. UBS Wealth Management expects that MSCI China Index EPS growth this year will be about 13%, and that profit growth in the technology sector could reach 20% to 25%. In addition, policy remains actively supportive of AI development and technological innovation; as market sentiment and fundamentals improve, earnings, valuations, and positioning are expected to gradually recover.

In its report, the strategy team at 广发策略 analyzed that under short-term external disturbances, the structural advantages of Chinese assets and policy support still exhibit resilience. Valuation provides a safety cushion that protects the bottom, while industrial upgrading and policy dividends provide an upward catalyst. Against the backdrop of global asset reallocation, China’s asset safety advantage remains prominent, and the logic for medium- to long-term allocation is clear.

The view from Boshi Fund (博时基金) is that going forward, attention should be paid to whether improvement in demand can transmit from manufacturing to a broader range of services industries, and whether cost pressures will erode corporate earnings. It recommends focusing on the upcoming first-quarter economic data and listed company earnings reports to verify the actual strength of the fundamental improvement. On the investment side, in the short term—amid disruptions from external geopolitical conflicts—defensive strategies may still be the better choice. In equities, investors may consider an allocation mix of “low-volatility dividends + growth with certainty.”

CITIC Securities (华泰证券) said that looking ahead, there are geopolitical variables externally and the “pre-holiday effect” externally suppressing market activity internally, putting pressure on trading activity. But from a cross-month perspective, as April’s A-share market enters a period of concentrated earnings releases, the market’s pricing anchor is expected to gradually penetrate through sentiment disruptions and return to verifying fundamentals.

In terms of allocation, HuaTai Securities recommends moderately focusing on the coal and power segments and chemical raw materials that may benefit from high oil prices and have the ability to pass through price increases, and using lower-priced necessities consumption as a core holding.

A certain private fund manager said the market may continue to be a structurally differentiated range-bound market. The macro and industry-side cyclical conditions and micro-level performance are even more important. There are three directions worth paying attention to: first, a price-increase rally for resource-oriented commodities catalyzed by the warming up of overseas geopolitical conflicts, such as oil, coal, new energy, and aluminum; second, dividend directions with defensive attributes, such as banking, public utilities, and service consumption oriented more toward domestic demand, as well as agriculture and food & beverage; third, directions with stronger earnings certainty, such as AI hardware and software, advanced manufacturing, military industry, and innovative drugs. After market risk appetite stabilizes, these may also show performance.