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.

A Zhongyuan Securities research report states that in April the A-share market is likely to be dominated by volatility and consolidation. The key variable is still the uncertainty in the Middle East, which limits the index’s upside room. It continues to recommend adopting a prudent allocation strategy: while firmly holding defensive dividend assets (banks, transportation, and utilities) to withstand market fluctuations, also lay out for energy security—such as power equipment and new energy (lithium batteries, solar). Risk points to watch include whether the April geopolitical conflict will unfold more than expected; whether a marginal tightening in overseas liquidity triggers synchronized downside moves; and the concentrated period for earnings report releases, where significant volatility may be caused if individual stock performance falls short of expectations.

The full text is as follows

【Zhongyuan Strategy】 Monthly Strategy: Prudent Allocation in a Volatile Market Structure, Focusing on the Dividend-Style Defense and Energy Security Main Theme

Investment Highlights:

Stock Market Review. In March 2026, the broad market indexes fell across the board. Among them, Northerncom 50, STAR Market 50, and CSI 1000—representing small- and mid-cap segments—led the decline, with losses of 18.79%, 15.57%, and 10.99%, respectively, showing a significant drop in risk appetite. Growth stocks were dealt a heavy blow, mainly because the deterioration of the Middle East situation drove international oil prices to break through $100 per barrel, causing the “stagflation” trade globally to heat up. This was compounded by a weakening overseas risk appetite, leading A-shares’ risk appetite to switch back and forth repeatedly. At the style level, financials and stability-oriented sectors performed relatively defensively, while high-volatility growth and cyclical sectors recorded the largest declines. Capital showed a clear high-low rotation and a defensive posture. At the industry level, TMT, parts of midstream manufacturing, discretionary consumer, non-bank financials, and real estate sectors all saw sharp drops, whereas utilities and dividend-style sectors performed better, indicating that investors are seeking a logic of risk hedging amid external uncertainty.

Bond Market Review. In March, in the interest-rate bond market, shorter duration segments and middle-short duration segments had an advantage. The 10-year government bond futures rose slightly by 0.01%, while the 30-year government bond futures fell back sharply, down 2.66%, highlighting pressure on the long end. The main influencing factors were: on the one hand, data such as exports and inflation in January to February significantly exceeded expectations across the board—for example, export year-on-year growth demonstrated the resilience of electromechanical and labor-intensive products; CPI turned from negative to positive; and PPI rose on a month-on-month basis in consecutive months—reflecting the resilience of domestic demand and industrial recovery, thereby validating the economy’s recovery strength at the start of the year and indirectly suppressing long-end interest-rate expectations. On the other hand, amid external developments, the Iran–US conflict continued to escalate, pushing up international oil prices and intensifying concerns about imported inflation, which further pressured long-end yields. In terms of institutional behavior, there was also a structural preference: compared with government bonds, local government bonds, credit bonds, and policy bank bonds performed better. This reflects that before investors’ risk appetite improved noticeably, funds continued to flow into middle-short duration credit bonds. Looking ahead to April, if the Middle East situation remains unclear, the bond market pattern from March may persist, with middle-short bonds continuing to lead.

Allocation Recommendations: From the macro fundamentals, March is a traditional peak season for ramping up production. The PMI returned to an expansion range, and investment, social financing, and exports improved in January and February. However, the financing intensity of the real economy and the endogenous driving force of consumption remain insufficient. On the price side, upstream inflation pressure rises due to oil prices, and the recovery in the PPI strengthens this effect. From the policy side, after the Two Sessions, fiscal efforts and structural monetary policy are expected to coordinate. From the liquidity side, at the end of the quarter, funding costs remain stable, and the central bank has been relatively supportive of market liquidity. But external liquidity exists at the margin tightening: in March, the Fed’s tone was more hawkish, placing greater emphasis on the impact of energy prices on inflation. In terms of market sentiment, under high volatility, theme rotation accelerates, trend continuity is not strong, and the persistent outflow trend from broad-based index ETFs has not ended. Overall, in April the A-share market may be mainly characterized by volatility and consolidation, and the core variable remains the uncertainty in the Middle East, which limits the index’s upside. It is still recommended to take a prudent allocation approach: while holding dividend assets (banks, transportation, utilities) to defend against volatility, also allocate for energy security such as power equipment and new energy (lithium batteries, solar). Risk points to watch include whether the April geopolitical conflict will unfold more than expected, whether a marginal tightening in overseas liquidity triggers a synchronized move lower, and whether the concentrated period for earnings report releases leads to significant volatility if individual stock performance misses expectations. If the above risks overlap and cause A-shares to experience volatility beyond expectations, the regulatory authorities may stabilize the market by increasing broad-based ETF subscriptions, guiding long-term capital to enter, and releasing signals such as reducing the reserve requirement ratio (RRR).

Risk Warning: Policy and economic data come in below expectations; risk events shock market liquidity.

（Source: Yicai）