On the first trading day of April, China's A-shares rebounded significantly, resulting from improved global risk sentiment and marginal recovery in the domestic economy. The US and Iran signaled a potential end to the Middle East conflict, alleviating investors' concerns about energy supply shocks and rising global risk aversion. Meanwhile, China's official manufacturing PMI returned to expansion territory in March, providing positive fundamental support for the market. The combination of these factors allowed the previously cautious A-shares to regain an upward recovery opportunity.
Resonance of Risk Appetite and Macroeconomic Data
From a cross-market logic perspective, easing geopolitical risks most directly affects risk appetite rather than profit expectations. When the market senses a potential cooling of the Middle East conflict, global equity assets typically benefit first, with the risk premium embedded in crude oil and safe-haven assets experiencing some rollback. As an emerging market equity asset significantly influenced by global sentiment, A-shares naturally see a valuation recovery process.
However, the rise in A-shares on Wednesday was not purely "externally driven." The official manufacturing PMI in China rose to 50.4, ending two consecutive months below the threshold and suggesting to the market a potential marginal improvement in domestic demand, production, or order chains. It is noteworthy that although the S&P Global Manufacturing PMI remained in the expansion zone at 50.8, it fell short of market expectations, implying China's economic recovery is more of a low-slope rebound rather than a rapid acceleration. This is why, although the market generally rose, it has not yet formed a strong trend pattern with both volume and price rising.
Cross-Asset Implications
The asset implications of this rebound in A-shares are mainly reflected on three levels. First, within the equity market, style preferences have begun to tilt towards growth and high-elasticity sectors, with CSI STAR 50, ChiNext, and the gaming index showing markedly higher gains than broad-based indices, indicating that funds are more willing to participate in the valuation recovery of risk assets. Second, if the Middle East conflict further eases, global market concerns about energy price shocks will decrease, helping improve global capital allocation sentiment towards Asian assets. Third, if domestic economic data continues to improve, A-shares may further transition from a "sentiment recovery market" to a "fundamental confirmation market"; conversely, if geopolitical risks recur or domestic data continue to diverge, the market may return to a state dominated by high volatility and thematic rotation.
Market Stage
Currently, A-shares seem to be in the "early stage of expectation recovery" rather than the "mid-stage of trend market." This judgment is based on two facts: first, trading volume remains low for the year, indicating market confidence has not fully recovered; second, analysts generally believe that unless the Middle East situation truly stabilizes, the market will maintain a high level of caution. This means that although the index has short-term upward momentum, it is still vulnerable to disruptions from sudden news, and sector rotations will be faster than trend diffusion.
In a longer narrative, if geopolitical risks continue to diminish, domestic manufacturing prosperity continues to improve, and incremental funds gradually flow back, then A-shares may evolve from the current structural recovery into a broader risk appetite rally. If these conditions are not synchronously met, the market is more likely to repeatedly digest positives and uncertainties amidst fluctuations, maintaining a bias towards strength but not a linear trajectory.
