Asia-Pacific stock market plunges! 133 A-shares hit limit down, Hong Kong tech stocks dive sharply, institutional analysis here

How does geopolitical conflict trigger a chain reaction in Asia-Pacific stock markets?

Reporter | Jin Shan, Li Yiwen, Li Yuchen

Editor | Jiang Peixia

On March 23, the Asia-Pacific stock markets collectively plummeted. The Nikkei 225 index closed down 3.48%, and the KOSPI index fell 6.49%. During the morning session, South Korea’s KOSPI 200 futures dropped 5%, triggering a circuit breaker. The three major A-share indices all declined over 3%, with the Shanghai Composite barely holding above 3,800 points at the close. Hong Kong’s Hang Seng Index and Hang Seng Tech Index both fell over 4% intraday.

Specifically, by the close, the Shanghai Composite dropped 3.63%, the Shenzhen Component fell 3.76%, and the ChiNext Index declined 3.49%. The combined trading volume of Shanghai and Shenzhen markets was 2.43 trillion yuan, an increase of 144.7 billion yuan from the previous trading day. Over 5,100 stocks declined, including 133 stocks hitting the daily limit down.

Image source: 21 Finance Client

In terms of sectors, the power sector was repeatedly active, with China Power LiaoNeng hitting six consecutive limit-ups, Dongfang New Energy hitting four limit-ups in six days, and L新能源, Liaoning Energy, Langfang Development, Zhejiang New Energy, among others, hitting the daily limit. Two-wheel vehicle concepts surged, with Aima Technology and Suning Shares hitting the limit-up, and Bolivian rose over 10%. On the news front, escalating Middle East geopolitical tensions led to a sharp rise in international oil prices this year. After trading hours, the National Development and Reform Commission took action to temporarily regulate domestic oil prices.

The sectors with the largest declines included precious metals, agriculture, food, and aviation. Chifeng Gold and Sichuan Gold hit the daily limit down. In the afternoon, gold and silver prices plunged sharply, with spot gold temporarily falling below $4,100 per ounce.

Hong Kong’s tech stocks all declined, with Bilibili, Huahong Semiconductor, and Baidu Group falling over 5%. Kuaishou, Alibaba, JD.com, Meituan, Xiaomi, and others dropped more than 3%.

Market analysis generally suggests that the core pressure currently stems from evolving expectations of geopolitical conflicts. Li Haonan, an investment advisor at Yue Sheng Wealth Management, told 21 Finance that “geopolitical disturbances are one of the main reasons behind the sluggish performance of A-shares.” The ongoing escalation of US-Iran tensions caused a broad sell-off in Asia-Pacific markets on Monday, affecting precious metals markets as well. Global liquidity expectations fluctuated, leading to phased capital reallocation. Coupled with the domestic earnings disclosure period, investors’ outlook on economic recovery and corporate profitability diverged, resulting in a cautious stance. Additionally, high-frequency quantitative trading increased intraday volatility, with more instances of morning rallies followed by afternoon sell-offs, further amplifying market fluctuations. Multiple factors together contributed to the current weak pattern of A-shares.

However, some brokerage firms remain optimistic about the future trend of A-shares. Li Haonan believes that the current adjustment is a resonance of technical, capital, and sentiment factors. The support around 3,800 points is relatively strong, and the increased trading volume on Monday suggests that market risk sentiment may have been fully released. There is no need for excessive pessimism at this stage. Going forward, attention should be paid to changes in trading volume, institutional capital flows, and policy implementation. After fully digesting selling pressure, the market may still return to a volatile upward channel. (See details)

In addition, in an environment of high uncertainty, “anti-volatility” has become a short-term allocation strategy recommended by many institutions.

Yao Pei, an analyst at Huachuang Securities, pointed out, “In the short term, focus on low-volatility assets, the strategic value of cyclical resources throughout the year, and wait for risk appetite and liquidity to improve for innovative technology sectors. Before geopolitical oil prices stabilize, at the bottom of the annual report season, prioritize stable, low-volatility assets such as coal, agriculture, insurance, new energy, and Hang Seng Tech. If geopolitical tensions ease and risk appetite and liquidity recover, innovative AI sectors may also become more resilient.”

China Europe Fund suggests that although the AI wave continues, the trend for growth themes may weaken. In a volatile environment, due to expectations of rising domestic PPI, switching between stocks and bonds for defensive purposes is challenging. It is recommended to seek dividend-oriented defensive stocks within equity assets. Focus on three areas: first, traditional low-volatility dividend sectors like banks; second, technology sectors with significant fundamental improvements not yet fully priced in, such as computing hardware; third, cyclical sectors driven by safe-haven demand, like oil and gas.

(Disclaimer: The content of this article is for reference only and does not constitute investment advice. Investors operate at their own risk.)

Produced by | 21 Finance Client, 21st Century Business Herald