Zhongyuan Securities: The April A-share market is likely to be characterized mainly by fluctuations, with a focus on dividend defense and energy security themes.

CITIC Securities’ research report says that in April, the A-share market may be dominated by consolidation, with the core variable still being uncertainty in the Middle East situation, which limits the index’s upside space. It continues to recommend adopting a prudent allocation strategy: while staying firm on dividend assets (banks, transportation, and utilities) to withstand volatility, also lay out energy-security themes such as power equipment and new energy (lithium batteries, solar PV). Risk points to watch include whether the April geopolitical conflict is unfolding beyond expectations, whether overseas liquidity tightening triggers a synchronized downside move, and the dense earnings-report disclosure period, such as the potential for substantial volatility if individual stock results miss expectations.

Full text is as follows

【Zhongyuan Strategy】Monthly Strategy: Prudent Allocation in a Volatile Trading Pattern, Focusing on Dividend Defense and Energy Security as the Main Line

Investment Highlights:

**Stock Market Review.**In March 2026, the major benchmark indices fell across the board, with North Star 50, Sci-Tech 50, and CSI 1000—the representatives of mid/small-cap stocks—leading the declines, with drops of 18.79%, 15.57%, and 10.99% respectively. This shows that market risk appetite fell significantly; growth stocks suffered severe setbacks. The main reasons were the deterioration of the Middle East situation, which drove a breakout in international oil prices to above $100 per barrel, causing the “stagflation” trade to heat up globally. Combined with weaker overseas risk appetite, this led to repeated switching of risk appetite in the A-share market. On the factor level, financial and stability-oriented sectors held up relatively better, while high-volatility growth and cyclical sectors saw larger declines. Capital showed a clear rotation between high and low and a defensive posture. At the industry level, TMT, parts of midstream manufacturing, discretionary consumption, non-bank financials, and the real estate sector all experienced sharp declines, whereas utilities and dividend-related sectors performed better. This indicates that investors seek a defensive logic to avoid risk amid external uncertainty.

**Bond Market Review.**In March, in the interest-rate bond market, intermediate-to-short duration issues outperformed. The 10-year government bond futures rose slightly by 0.01%, while the 30-year government bond futures retreated sharply, falling by 2.66%, highlighting pressure in the long end. The main influencing factors were as follows: on one hand, data such as exports and inflation in January–February exceeded expectations across the board—for example, year-over-year export growth demonstrated the resilience of electromechanical and labor-intensive products; the CPI turned from negative to positive, and the PPI rose year over year on a month-on-month basis, reflecting stronger domestic demand and industrial repair, thereby validating the resilience of the economy as it started the year and indirectly suppressing long-end yield expectations. On the other hand, amid external developments, the Iran–U.S. conflict continued to escalate, pushing up international oil prices and intensifying concerns about imported inflation, which further weighed on long-end yields. In terms of institutional behavior, there was also a structural preference: compared with government bonds, local government bonds, corporate credit bonds, and policy bank bonds performed better, reflecting that before risk appetite improved meaningfully, funds continued to flow into intermediate-to-short duration credit bonds. Looking ahead to April, uncertainty in the Middle East situation may persist, likely continuing March’s bond-market pattern in which intermediate-to-short duration bonds hold an advantage.

**Allocation Recommendations: From a Macro and Fundamentals Perspective,**as March is the traditional peak season for resumption of work, the PMI returned to the expansion range, and investment, social financing, and exports strengthened in January–February. However, real-economy financing intensity and consumption’s endogenous growth drivers were insufficient. On the price side, supported by oil prices, upstream inflation pressure moved upward, and the rebound in the PPI further reinforced this. **From a policy perspective,**after the Two Sessions, fiscal efforts and structural monetary policies are coordinated. **From a liquidity perspective,**at the end of the quarter, funding costs remained stable, and the central bank is taking a relatively protective stance toward market liquidity. But external liquidity may be tightening at the margin: in March, the Federal Reserve’s stance was more hawkish, with greater attention paid to the impact of energy prices on inflation. **From market sentiment,**under high volatility, theme rotation accelerates, but trend continuity is weak, and the sustained outflow trend from broad-based ETFs has not ended. **Taken together,**in April the A-share market may be dominated by consolidation, and the core variable is still Middle East uncertainty, which keeps the index’s upside limited. It continues to suggest adopting a prudent allocation approach: while holding firmly to dividend assets (banks, transportation, utilities) to withstand volatility, also allocate toward energy security such as power equipment and new energy (lithium batteries, solar PV). Risk points to watch include whether the April geopolitical conflict unfolds beyond expectations, whether overseas liquidity tightening triggers a synchronized downside move, and the dense period of earnings report disclosures—such as potentially large volatility caused by individual stocks’ results coming in below expectations. If the above risks compound and lead to A-shares experiencing volatility beyond expectations, the regulatory authorities may stabilize the market through measures such as increasing subscription of broad-based ETFs, guiding long-term capital to enter the market, and releasing signals such as lowering the reserve requirement ratio (RRR).

**Risk Warning:**Policy and economic data underperforming expectations, and market liquidity shocks from risk events.

（Source: First Financial）