Q1 2026 A-shares conclude: Volatile pullback hides opportunities, CSI A500 becomes a new target for allocation

As of March 31, the 2026 Q1 A-share market officially wrapped up. Affected by external factors such as overseas geopolitical conflicts, the overall market showed a trend of “rallying high then pulling back,” with “structural differentiation” across sectors. All three major indices finished their quarterly lines with collective declines, and overall risk appetite fell somewhat. However, alongside the valuation return to a reasonable range and steady support from domestic economic fundamentals, clear investment opportunities have already been taking shape amid the sluggishness. The allocation value of broad-based indices in particular—especially the CSI A500 Index—has become prominent, and related quant-enhanced funds have accordingly made their debut.

Q1 A-shares: first strong then weak, with valuation advantages standing out in the volatility

Looking back at Q1 A-share performance, the market displayed a clear “first strong then weak” pattern. By phase: in January, driven by both policy and liquidity, the market saw a “strong start,” with the Shanghai Composite Index briefly breaking above 4100. In February, market volatility intensified, and the rally shifted from “broad-based gains” to “structural differentiation.” In March, with sentiment pressured by disruptions from international geopolitical conflicts, risk appetite declined, leading to index pullbacks. According to statistics, total trading value across Q1 A-shares exceeded 144 trillion yuan, far above 87 trillion yuan in the same period of 2025, and trading activity remained at a high level.

Under the backdrop of volatile pullbacks, market valuations gradually returned to a reasonable range, and investment appeal continued to improve. Data from Wind show that as of March 31, the CSI A500 Index’s trailing price-to-earnings ratio fell to 16.84x, and its price-to-book ratio dropped to 1.65x, further highlighting valuation advantages. On the same day, the CSI A500 Index closed at 5526.73 points, down 1.21% from the prior trading day. Overall, Q1 presented a trend of volatile pullbacks, yet valuations stayed at a relatively reasonable level.

Solid domestic economic fundamentals, with policy support strengthening the market’s foundation

Compared with the ongoing disruptions from overseas geopolitical events, domestic economic and policy certainty has become the core support for market stability. From economic data, the domestic economy has maintained strong resilience, with key indicators continuing to recover and not showing clear impact from the external environment.

According to data from the National Bureau of Statistics, in January–February 2026, Chinese industrial enterprises above designated size achieved total profits of 1.44M yuan, up 15.2% year over year, showing resilience in corporate earnings. Customs data show that in the same period, China’s total import and export value of goods was 7.73 trillion yuan, up 18.3% year over year. Exports rose 19.2% year over year; export trade remained strong, reflecting the vitality of China’s economy amid a global industrial chain recovery.

The production side also performed strongly. In March, the manufacturing PMI rebounded to 50.4%, returning above the break-even line. The new orders index reached 51.6%, indicating that manufacturing market demand conditions continued to improve. On the policy front, the “Fifteenth Five-Year Plan Outline” was officially released on March 13. It lists technological innovation, modern finance, and expanding domestic demand as key issues. It proposes “intelligentization, greening, and integration” development measures to guide industrial upgrading led by new quality productive forces, providing clear direction for high-quality economic development. On March 26, the People’s Bank of China’s Monetary Policy Committee quarterly meeting clarified the plan to continue implementing moderately accommodative monetary policy, maintaining ample market liquidity and providing strong capital support for the capital markets.

CSI A500 anchors new quality productive forces, becoming a benchmark for broad-based allocation

Against the backdrop of intensified style rotation and the continuation of a volatile market pattern, broad-based indices with wide industry coverage and strong risk diversification capabilities have become a preferred choice. Among them, the CSI A500 Index has gradually become a benchmark tool for allocating core assets, thanks to its broad coverage of new quality productive forces.

Compared with the CSI 300 Index, the CSI A500 Index has a lower allocation weight to traditional sectors such as finance and consumption, and is more focused on core and high-quality industries representing new quality productive forces such as industry and information technology. Data show that the combined weight of industries related to “new quality productive forces” in this index is nearly 70%. This aligns with China’s trend of high-quality economic development and the transition of old and new growth drivers, precisely matching the development requirements of the “Fifteenth Five-Year Plan,” and aims to effectively capture dividends from economic transformation.

In addition, the CSI A500 Index has balanced sector coverage, covering all 35 CSI secondary industries and 89 CSI tertiary industries. Its coverage of leading enterprises in CSI tertiary industries is better than that of other broad-based indices. It includes leading firms in traditional industries as well as many leading firms in sub-industries with high growth potential,” balancing market-cap representation and industry balance. In terms of the component stock structure, among its constituents, companies with total market value below 50 billion yuan account for 17% by weight and over 45% by count; the top 10 constituent stocks together account for only 20% of the weight, which helps reduce exposure to idiosyncratic risks.

Long-term performance is also impressive. According to Wind data, over the nearly ten-year period from 2016 to 2025, the CSI A500 Index’s cumulative increase in its range reached 30.09%, with an annualized return of 2.74%. This has clearly outperformed the CSI 300 Index, the CSI 500 Index, and the CSI All Share Index. Its risk-return ratio performance in the medium to long term has been standout.

(Data source: Wind. For the past ten years, data range 2016/1/1–2025/12/31. Annualized volatility and annualized Sharpe are calculated over the weekly period.)

Quant-enhanced funds enter the scene

As A-share valuations return to a reasonable range, together with policy guidance for new quality productive forces, the attractiveness of core assets has continued to increase. Recently, E Fund Management launched the E Fund CSI A500 Quantitative Enhanced Fund (Class A: 026742/C: 026743)****.

It is understood that the fund will be led by Qian Yating, a post-generation quant fund manager cultivated independently by E Fund Management. Public information shows that Qian Yating has 9 years of industry experience and 4 years managing funds, with rich quant investment experience. The fund managed by her that also tracks the CSI A500 Index has shown outstanding performance. As of the end of 2025, the one-year return of E Fund CSI A500 Enhanced A was 29.82%, outperforming the performance benchmark by 8.52%; the return over the past six months was 24.66%, outperforming the performance benchmark by 3.95%.

(Data source: the fund’s periodic report; index data from Wind, as of 2025/12/31.)

Industry insiders said that Q1 2026’s volatile pullback in A-shares provides a window for long-term positioning. Benefiting from advantages such as balanced industry exposure, coverage of new quality productive forces, and reasonable valuations, the CSI A500 Index is expected to be a favorable vehicle.

(Fund performance data source: the fund’s periodic report; index data from Wind, as of 2025/12/31. Past fund performance does not predict future performance. The performance of other funds managed by the fund manager does not constitute a guarantee of the fund’s performance. Since the inception of E Fund CSI A500 Index Enhanced A, the cumulative increase/decrease has been 29.11%, while the performance benchmark in the same period was 19.58%. For 2025, the fund’s cumulative increase/decrease and the benchmark performance in the same period were 29.82%/21.3%. Former fund managers: Jin Xuwei 20250919–managed to present, Qian Yating 20241230–managed to present. Data sources: Wind, National Bureau of Statistics, General Administration of Customs, fund periodic reports. The fund-related information mentioned in this article is for product introduction only and does not constitute an investment recommendation)

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