Asian equity markets faced downward pressure on Monday, influenced by escalating Middle East tensions. Japan's Nikkei 225 index opened lower, declining by 2.5%, while South Korean markets were closed for a holiday. In China's A-share market, the three major indices opened collectively lower, with the Shanghai Composite Index showing relative resilience. At the time of writing, the Shanghai Composite was down 0.3%, the Shenzhen Component Index had fallen 0.79%, and the ChiNext Index dropped 1.15%.
Notably, despite the overall weakness in Asian markets, a key variable emerged. While Japan's TOPIX Air Transportation Index fell 4.2%, the TOPIX Mining Index rose 3.5%. Australia's resource-heavy stock index also declined, but its drop was limited to approximately 0.4%. This pattern suggests markets may have entered a risk-off mode, yet systemic liquidity remains intact, with structural differentiation beginning to appear. Some analysts indicate that significant military escalation could drive a broad shift of funds into classic defensive sectors like utilities and healthcare, which typically demonstrate stability during economic turbulence. Conversely, high-risk growth stocks, along with economically sensitive industrial and financial shares, may face selling pressure.
Turning to the A-share market performance, oil and gas stocks opened sharply higher. Tongyuan Petroleum, China Oilfield Services, Zhongman Petroleum, Zhunyou Shares, Sinopec Oilfield Service, and Beken Energy all opened at the daily limit-up price. The shipping sector also started strong, with COSCO SHIPPING Energy Transportation and China Merchants Energy Shipping hitting the limit-up at the open, while Sino Ocean Group surged over 14%. Ningbo Marine, China Merchants Energy Shipping, and Ningbo Ocean Shipping also opened higher.
The market faces a confluence of events this week, including the upcoming "Two Sessions" political meetings and the sudden escalation of Middle East tensions over the weekend. Looking ahead, BOC Securities suggests that while A-shares might experience short-term interference from geopolitical volatility and risk-off sentiment, the magnitude of external shocks is expected to be limited. They advise focusing on resource commodities and the domestic AI computing power sector. Huaxi Securities notes that as the "Two Sessions" period approaches, stability is likely to be a key characteristic of the A-share market.
**Hot Sector Review: Oil & Gas Stocks Surge** Oil and gas stocks opened significantly higher, with multiple companies including Tongyuan Petroleum, China Oilfield Services, Zhongman Petroleum, Zhunyou Shares, Sinopec Oilfield Service, and Beken Energy reaching the daily limit-up. The catalyst is news of conflict in the Middle East blocking a critical strait. Analysts predict that if traffic through the Strait of Hormuz faces long-term disruption, Brent crude oil prices could exceed $120 per barrel.
**Institutional Perspectives**
**Huaxi Securities: "Two Sessions" Period Characterized by Stability** Entering the "Two Sessions" period, the A-share market is expected to be characterized by stability. Escalating geopolitical conflicts overseas may trigger short-term global capital flows into safe-havens and inflation trades. The duration of the conflict will be a critical variable influencing the market. Domestically, with the "Two Sessions" scheduled for early March, expanding domestic demand and developing new productive forces are likely to be annual priorities. The deliberation of the draft outline for the 15th Five-Year Plan will anchor medium- to long-term industrial directions. Historical analysis shows that markets often operate steadily during the Two Sessions, with the probability of market gains increasing after the meetings conclude. Sectors emphasized by policy during the sessions often see repeated performance throughout the subsequent year.
**CITIC Securities: Price-Driven Rally Expected to Continue in March** Narrative-driven trends and price catalysts remain the primary drivers of the current market. CITIC Securities has constructed quantitative indicators to categorize recent sector performance as either sentiment-driven or fundamentals-driven. Some high-performing sectors are classified as sentiment-driven, such as precious metals, charging/swapping infrastructure & power equipment, and bulk chemicals. Other sectors with more modest gains are also seen as sentiment-driven, including intelligent driving, media & gaming, humanoid robots, and baijiu liquor. Some strongly performing sectors are categorized as fundamentals-driven, such as rare earths & minor metals, wind power, and chip design. Conversely, a few sectors with average performance but high discussion热度 are classified as fundamentals-led, like North American AI computing and cement/building materials. From a market trend perspective, signals from both event catalysts and quantitative price-volume frameworks suggest that the narratives around rising prices and AI remain in a "safe zone." The outbreak of geopolitical risk involving Iran and rising policy expectations around "anti-involution" measures near the Two Sessions may further strengthen the price-driven theme. From an allocation perspective, the combination of AI exposure and supply constraints equals price increase expectations. The price-driven rally is anticipated to continue through March.
**BOC Securities: Short-Term Impact from Geopolitics Limited; Focus on Resources and Domestic AI** A-shares may face short-term interference from geopolitical fluctuations and risk-off sentiment, but the extent of external impact is expected to be limited. The focus should be on resource commodities and the domestic AI computing power sector. Looking forward, short-term volatility in global risk asset prices may increase, with gold and oil prices likely to accelerate their upward trend. Currently, the impact on A-shares is primarily concentrated in risk appetite. Medium-term, the A-share market is expected to revert to domestic fundamentals and policy expectations. With China's Two Sessions commencing next week, the short-term impact on A-shares is likely to be smaller than on overseas markets. Post-holiday work resumption and the release of macro policies around the Two Sessions are key focuses for domestic investors. As previously noted, rising overseas uncertainties are expected to provide fresh catalysts for the current resource commodities rally. In the short term, developments in the Middle East and the resurgence of US trade policy uncertainty could provide strong support for precious metal prices. Catalyzed by both internal and external factors in the first quarter, now appears to be an opportune time for allocating to cyclical resource commodities.
Comments