China Stock Market Expected to Form Important Bottom and Entry Point | Guotai Haiton China Equity Strategy Weekly Report 20260322

(Source: Yiguan Trend)

Authors: Fang Yi / Guo Yihan / Tian Kaixuan / Su Hui

Core Viewpoint: Micro-level trading shocks are unlikely to last long; the current position is not suitable for blindly selling off. China’s stock market is expected to form an important bottom and hitting zone. China’s supportive easing stance and diversified reserves/diversified growth help to break risk narratives more quickly.

Investment Highlights

▶ China’s stock market is expected to form an important bottom and hitting zone. Stability remains the foundation, and confidence is key. The Shanghai Composite Index broke below key levels, although the CSI 300 and ChiNext Index experienced limited pullbacks, the overall divergence is significant, with All A shares averaging nearly 9% correction, and CSI 1000 down 10%. Recent market adjustments are due to two reasons: first, inflation risks and expectations of financial tightening. The uncertain US-Iran developments, energy inflation triggered by this, and subsequent financial tightening concerns. Second, micro-structural loosening in stock trading. Although external conflicts do not directly impact China logically, uncertain outlooks reduce market risk appetite. Recently, stocks and bonds have adjusted simultaneously, with floating gains in fixed income+ products narrowing, and increased unrealized losses constraining institutions with relatively rigid liabilities and high positions since early this year. We expect the impact of micro-trading shocks to be short-lived; the current position is not suitable for blindly selling, and China’s stock market is likely to form an important bottom and hitting zone. Although inflation risks remain, China’s assets benefit from increased technological productivity, relatively stable safety conditions, and stable economic, social, and capital markets. Even globally, these are scarce. China’s diversified energy reserves and diversified growth are also valuable.

▶ How will energy shocks and financial tightening expectations be priced? A three-stage evolution: expectation shock – real shock – return to growth. In recent roadshows, some investors expressed deep concerns about energy price shocks and financial tightening expectations. A key historical reference is the resilience of US stocks in 2022 amid Russia-Ukraine conflict and multiple Fed rate hikes, showing strong resilience and rebounds without collapse. Risk pricing generally occurs in three stages: first, expectation shock. From March to June 2022, Russia-Ukraine conflict erupted, oil prices surged, and the Fed began substantial rate hikes, leading to US stock declines; second, real shock. After June 2022, the conflict persisted but intensity did not increase, oil prices started to decline from high levels, and risk pricing largely ended. However, due to inflation stickiness and Fed hikes, US stocks generally rebounded and oscillated. third, return to growth logic. Since January 2023, US AI industry has made active progress, with capital expenditure and performance driving stock prices higher. From this process, two insights on market pricing emerge: 1) Risk pricing does not mean risks are over; it ends when intensity stops rising. 2) After risk pricing ends, the key is whether the market has growth capacity. Currently, the US tolerates or even favors higher inflation; China’s central bank emphasizes supportive monetary policy, with stronger easing certainty, and increased tech investment and stable domestic demand help to break risk narratives faster.

▶ Industry comparison: Financial and stability sectors remain top choices; China’s tech manufacturing and stable domestic demand are key to breaking deflation risk narratives. 1) Financial and stability sectors: important stabilizers, high dividend yields have allocation value. Recommended: banks, power, highways, coal. 2) Tech manufacturing and energy transition: China’s globally competitive and cost-advantaged capital goods and equipment companies benefit from energy shocks and transition. Recommended: power equipment, new energy vehicles, engineering machinery. AI space is broad; by 2026, increased tech investment in China is expected to accelerate domestic growth. Recommended: semiconductors, communication equipment, machinery. 3) Domestic demand value: policy deployment stabilizes investment; combined with rising inflation, this may boost replenishment demand. Recommended: building materials, construction, hotels, consumer goods.

▶ Theme recommendations: 1) Energy transition: geopolitical conflicts disrupt key energy supplies; policies focus on building new energy systems and future energy. Favorable sectors: power grids, new energy storage, nuclear fusion. 2) Computing and energy synergy: connecting computing power, electricity, and source-grid-load-storage integration. Favorable sectors: computing infrastructure, grid digitalization, green energy data centers. 3) Token going global: domestic large models lead in global calls; favorable sectors: large models, AIDC, domestic computing power. 4) Commercial space: developing aerospace as a new pillar industry; favorable sectors: medium/large rockets, launch services.

▶ Risk warnings: Overseas economic recession exceeding expectations; global geopolitical uncertainties.

Contents

01

China’s stock market is expected to form an important bottom and hitting zone. Stability remains the foundation, and confidence is key. The Shanghai Composite Index broke below key levels, although the CSI 300 and ChiNext Index experienced limited pullbacks, the overall divergence is significant, with All A shares averaging nearly 9% correction, and CSI 1000 down 10%. Recent market adjustments are due to two reasons: first, inflation risks and expectations of financial tightening. The uncertain US-Iran developments, energy inflation triggered by this, and subsequent financial tightening concerns. Second, micro-structural loosening in stock trading. Although external conflicts do not directly impact China logically, uncertain outlooks reduce market risk appetite. Recently, stocks and bonds have adjusted simultaneously, with floating gains in fixed income+ products narrowing, and increased unrealized losses constraining institutions with relatively rigid liabilities and high positions since early this year. We expect the impact of micro-trading shocks to be short-lived; the current position is not suitable for blindly selling, and China’s stock market is likely to form an important bottom and hitting zone. Although inflation risks remain, China’s assets benefit from increased technological productivity, relatively stable safety conditions, and stable economic, social, and capital markets. Even globally, these are scarce. China’s diversified energy reserves and diversified growth.

02

How will energy shocks and financial tightening expectations be priced? A three-stage evolution: expectation shock – real shock – return to growth. In recent roadshows, some investors expressed deep concerns about energy price shocks and financial tightening expectations. A key historical reference is the resilience of US stocks in 2022 amid Russia-Ukraine conflict and multiple Fed rate hikes, showing strong resilience and rebounds without collapse. Risk pricing generally occurs in three stages: first, expectation shock. From March to June 2022, Russia-Ukraine conflict erupted, oil prices surged, and the Fed began substantial rate hikes, leading to US stock declines; second, real shock. After June 2022, the conflict persisted but intensity did not increase, oil prices started to decline from high levels, and risk pricing largely ended. However, due to inflation stickiness and Fed hikes, US stocks generally rebounded and oscillated. third, return to growth logic. Since January 2023, US AI industry has made active progress, with capital expenditure and performance driving stock prices higher. From this process, two insights on market pricing emerge: 1) Risk pricing does not mean risks are over; it ends when intensity stops rising. 2) After risk pricing ends, the key is whether the market has growth capacity. Currently, the US tolerates or even favors higher inflation; China’s central bank emphasizes supportive monetary policy, with stronger easing certainty, and increased tech investment and stable domestic demand help to break risk narratives faster.

03

Industry comparison: Financial and stability sectors remain top choices; China’s tech manufacturing and stable domestic demand are key to breaking deflation risk narratives. 1) Financial and stability sectors: important stabilizers, high dividend yields have allocation value. Recommended: banks, power, highways, coal. 2) Tech manufacturing and energy transition: China’s globally competitive and cost-advantaged capital goods and equipment companies benefit from energy shocks and transition. Recommended: power equipment, new energy vehicles, engineering machinery. AI space is broad; by 2026, increased tech investment in China is expected to accelerate domestic growth. Recommended: semiconductors, communication equipment, machinery. 3) Domestic demand value: policy deployment stabilizes investment; combined with rising inflation, this may boost replenishment demand. Recommended: building materials, construction, hotels, consumer goods.

04

Theme recommendations: Energy transition / Computing and energy synergy / Token going global / Commercial space

1. Energy transition: geopolitical conflicts disrupt key energy supplies; policies focus on building new energy systems and future energy. Investment suggestions: safe and transformative, accelerating the construction of clean, low-carbon, safe, efficient new energy systems, and building a strong energy nation. The 14th Five-Year Plan emphasizes accelerating the development of a clean, low-carbon, safe, and efficient new energy system, and strengthening energy resource supply security. Geopolitical conflicts threaten energy supply security; policies focus on building new energy systems and cultivating future energy. Focus on opportunities in new energy infrastructure, energy equipment, and future energy.

Direction 1: Benefiting from increased investment in major energy projects—power grids, wind, solar, hydro, nuclear, new energy storage.

Direction 2: Benefiting from breakthroughs in key technologies and scenarios—green hydrogen, nuclear fusion.

2. Computing and energy synergy: connecting computing power, electricity, and source-grid-load-storage integration. Investment suggestions: leading new infrastructure—large-scale intelligent computing clusters, computing-energy synergy. The 14th Five-Year Plan proposes accelerating the construction of national hub computing clusters and promoting green electricity and computing synergy. Increasing green power capacity requires new high-load scenarios; expanding computing power faces electricity cost and flexibility constraints; integrating computing and energy through source-grid-load-storage is essential.

Direction 1: Benefiting from large-scale intelligent computing clusters—HVDC, liquid cooling, energy storage.

Direction 2: Benefiting from grid digitalization—smart grids, virtual power plants.

Direction 3: Green energy and data center operators.

3. Token going global: domestic large models lead in global calls; China’s models connect with global AI demand. Investment suggestions: leveraging China’s AI resources to meet global AI needs, building an integrated system of electricity, computing, models, and applications. The 2026 government work report emphasizes creating new forms of intelligent economy, expanding “AI+,” and promoting commercialization and large-scale application of AI in key industries. The 14th Five-Year Plan aims to enhance efficient supply of computing, algorithms, and data, fostering innovation in models and algorithms, empowering various industries. China’s large models have talent, power, and competitive advantages; they lead in overseas markets and are part of strategic global deployment by top firms. China’s AI industry is gradually building an integrated advantage of electricity, computing, models, and applications.

Direction 1: Leading large models with global advantage, benefiting from increased token calls—domestic large model companies.

Direction 2: AIDC, computing power leasing, domestic GPUs.

Direction 3: Internet platforms with traffic entry points, user stickiness, high product maturity, and ongoing capital expenditure.

4. Commercial space: Low Earth Orbit (LEO) satellite internet network acceleration; breakthroughs in new technology and launch site infrastructure. Investment suggestions: accelerating LEO satellite network development; new tech breakthroughs and launch site infrastructure addressing capacity and cost issues. The 14th Five-Year Plan emphasizes developing strategic emerging industries like aerospace and accelerating LEO satellite network deployment. In 2025, China completed 92 space launches, including 51 commercial launches (rideshare and payload), accounting for 55.4%. By 2030, satellite launch demand is expected to increase over tenfold from 2024, requiring capacity expansion and cost reduction. Reusable and large liquid rockets, launch site construction, and terminal applications will drive industry scale-up. The Zhuque-3 plan aims for recovery tests in Q2 2026 and possibly first reuse flight in Q4, depending on test results. Private rocket companies’ financing and commercialization are accelerating.

Direction 1: Benefiting from increased launch and financing—medium/large reusable liquid rockets and low Earth orbit satellite manufacturing.

Direction 2: Benefiting from infrastructure investment—launch sites and special fuels.

05

Risk Warnings

Risks include: overseas economic recession exceeding expectations, and global geopolitical uncertainties.

Disclaimer

Guotai Haitong Strategy Team