3977 stocks are rising! A-shares are rebounding with lower volume, how should we adjust our positions?

On April 7th, the A-shares market experienced a post-holiday rally, with indices slightly rising, but daily trading volume shrinking to 1.62 trillion yuan, with 3,977 stocks closing higher, and the chemical sector leading a surge in limit-up gains.

Sources told reporters that the volume-constrained rise in A-shares is not a typical sign of a strong reversal; its core logic is the combined effect of exhausted selling pressure and structural risk aversion of funds. In the short term, market upward movement requires increased trading volume and support from core industries. Technology and non-ferrous metals sectors show offensive characteristics, while defensive sectors remain prominent, posing a risk of further decline.

Nearly 4,000 stocks rose

On the first trading day after the Qingming holiday, the market showed mixed signals: the good news was that the stock indices closed in the green, while the bad news was shrinking trading volume. The overall A-shares index stabilized with a slight rebound, having dipped into red during intraday trading before closing slightly higher. The Shanghai Composite rose 0.26%, closing at 3,890.16 points; the ChiNext Index rose 0.36%, closing at 3,160.82 points; the Shenzhen Component also gained 0.36%. The CSI 300 and SSE 50 closed flat, while the STAR 50 rose 1.42%, and the Beijing 50 declined 0.34%.

In terms of trading volume, the entire market’s daily turnover decreased by 45.32 billion yuan to 16.2 trillion yuan. Leverage funds also continued to retreat; as of April 3rd, the margin financing and securities lending balance in Shanghai, Shenzhen, and Beijing markets fell to 2.58 trillion yuan.

On the market, banks, precious metals, beverages, aerospace, optoelectronic devices, robotics, and stocks with dividend cuts generally declined, while fertilizer, pesticides, chemical raw materials, and Chiplet (advanced packaging) concepts led the gains.

Among the 31 first-level industries in the Shenwan classification, banking, food and beverages, automobiles, non-bank financials, and household appliances declined, but none fell more than 1%.

The remaining sectors closed in the green, with only 10 sectors gaining over 1%. Notably, basic chemicals, petroleum and petrochemicals, and coal sectors posted the largest gains.

The basic chemicals sector performed especially well, with 33 stocks hitting the daily limit-up. Lingwei Technology, Jiangtian Chemical, and Dongyue Silicon Materials achieved “20cm” limit-ups, while Xinghua Shares, Chitianhua, Yabang Shares, Youfu Shares, LiuHua Shares, Longxing Technology, Xin’an Shares, Sanfangxiang, Shama Shares, Zanyu Technology, Xinjiang Tianye, and Weiyuan Shares also hit the limit-up.

Overall, more stocks rose than fell, with 3,977 stocks closing higher, including 101 limit-up stocks; 1,426 stocks declined, with 18 limit-down stocks. Cambrian’s daily trading volume was 15.5 billion yuan, up 9.1%, closing at 1,119 yuan per share; Zhongji Xuchuang and Xinyi Sheng also closed higher, while Tianfu Communication saw a significant adjustment, with nearly 5% decline.

Cautiously view the volume-constrained rise

“Today’s volume-constrained rise in A-shares is not a typical sign of a strong reversal; its core logic is the combined effect of phase exhaustion of selling pressure and structural risk aversion of funds,” said Zhang Pengyuan, a researcher at PaiPaiWang Wealth, to the International Financial News. On one hand, the shrinking trading volume to recent lows indicates that panic selling has largely exhausted, and short-sellers’ strength has weakened, leading the market into a short-term balance between bulls and bears. On the other hand, funds have not fully attacked but have concentrated inflows into basic chemicals, oil, and coal sectors, reflecting clear risk-avoidance features.

Huh Hang Investment’s Chief Investment Officer, Hu Zhenyi, told reporters that the shrinking trading volume indicates insufficient selling pressure and entry funds, with obvious sector rotation characteristics. Short-term market upward movement depends on volume expansion and core industry support. Technology and non-ferrous metals have offensive traits, but if defensive sectors continue to outperform, there remains a risk of further decline. The market has already experienced significant correction, with most sectors adjusting over 20%. The 3,800-point level is a key support zone, and there is room for a rebound, with 4,000 points serving as a dividing line between strength and weakness. Sectors with strong first-quarter earnings, such as bulk commodities and semiconductors, have rebound potential.

Chen Xingwen, Chief Strategist at Heikai Capital, bluntly told reporters, “The pattern of ‘dull indices and lively stocks’ precisely indicates that the market is undergoing a silent chip exchange.” From a volume perspective, shrinking volume itself is not catastrophic, but three risks should be watched: first, liquidity traps—when trading volume remains below 1.5 trillion yuan and northbound funds do not return, the existing game can easily turn into a ‘kill all’ scenario; second, signals of declining sentiment—before Qingming, risk-averse demand and holiday-related news chaos increased investor caution, which is reflected in volume; third, the window for a change in trend is approaching—around April 8th, external geopolitical situations and internal policy expectations will resonate. If trading volume cannot be effectively expanded then, the 3,850-point support level will face tests.

Focus on three major risks

Based on current market influences and the relationship between volume and price, Zhang Pengyuan reminds investors to pay close attention to three risks: first, a volume-less rebound may easily turn into a trap for false signals, with risks of sharp pullbacks; second, in a stock game pattern, the risk of faster sector rotation; third, geopolitical disturbances and earnings shocks during April’s earnings disclosure period.

“With macroeconomic data for Q1 and annual and Q1 reports of listed companies gradually released, the market will enter a phase of fundamental verification. Short-term risk appetite may remain cautious,” Zhang Pengyuan predicts. From a macro perspective, domestic economic activity has marginally improved, but demand recovery still needs time; internationally, inflation and geopolitical uncertainties may continue to disturb global liquidity expectations. Under this background, the A-shares market is likely to continue oscillating in the short term, with structural opportunities remaining the main focus. Investors should focus on high-quality assets with solid fundamentals and reasonable valuations, while also positioning for policy support and industry recovery-driven structural investment opportunities.

“The market may continue a volatile and differentiated pattern, where mid-cycle prosperity and valuation safety margins become more important,” said Mingyu Asset. The ongoing US-Iran conflict exceeds market expectations, with US military buildup still underway, and whether the conflict will escalate significantly remains uncertain; the Strait of Hormuz remains blocked, intensifying global energy supply shocks and supply chain disruptions; stagflation expectations are rising, with US bond yields likely to continue rising, affecting market risk appetite; under the strong dollar environment, the renminbi’s appreciation pace has slowed.

How to position during the bottoming phase

How should investors manage their positions? Which sectors are worth focusing on?

Xing Shi Investment’s Chief Strategy Officer, Lei, analyzed that in the short term, due to the uncertain Middle East situation, the global risk appetite remains downward, continuing to disturb the domestic stock market, which is still highly volatile. In the medium to long term, compared to overseas uncertainties, Chinese assets’ investment value and attractiveness continue to rise, and the A-shares market offers opportunities from valuation revaluation and earnings recovery. On one hand, some sectors’ stock prices have already reflected the impact of high oil prices and tightening global liquidity, with valuations falling to low levels, making them suitable for medium- and long-term allocation. On the other hand, the broad technology sector still maintains high prosperity, and some traditional sectors may benefit from domestic price recovery, with profit improvement becoming a future investment theme.

“Deadline narratives in the Middle East situation and the Fed’s rate cut expectations will continue to disturb risk asset pricing. In the short term, the A-shares are likely to maintain a ‘bottoming first, then oscillating’ pattern.” Chen Xingwen believes that investors can focus on “inflation-benefiting assets.” In the context of the global new and old cycles switching, geopolitical conflicts, and AI capital expenditure resonance, commodities like oil, copper, aluminum, rare earths, and coal have strategic value for crossing market volatility, especially with US metal strategic reserves at historic lows, which may activate inventory replenishment needs. Additionally, the technological independence chain (semiconductors, computing infrastructure) and outbound manufacturing (machinery, chemicals, electrical equipment) remain offensive tools, but better entry points will come after valuations are digested. High-dividend state-owned and central enterprise stocks, as well as consumer leaders, can serve as a “safety cushion” for portfolios.

“Overall, the Middle East conflict still has the potential to escalate, and the A-shares market may continue to show a volatile and differentiated trend, with the impact likely smaller than overseas markets. The overall market style may lean toward undervalued defensive stocks.” Mingyu Asset suggests paying attention to resource price increases driven by overseas geopolitical tensions, such as oil and gas, new energy sectors; defensive attributes of banks, domestic demand-driven consumer services, food and beverages, and high-prosperity sectors like optical communications and innovative medicine. Companies with strong earnings visibility in AI hardware/software, advanced manufacturing, and military industries may also see a recovery once market risk appetite stabilizes.