What Is The Impact Of The Fed'S Interest Rate Policy On China'S Stock Market?

The Fed's interest rate will affect the world's financial market and how it will affect China's stock market.

Yellen believes that raising interest rates is a manifestation of confidence in economic progress and a vote of confidence in the US economy. The United States has a strong labor market and a resilient economy.

The policy is still relatively loose, inflation is still below 2%, and inflation is expected to rise to 2% in a timely manner.

On the shore, the yuan opened up 300 points against the US dollar, at 6.9350, closing at 6.9070 yesterday.

Under the Fed's rate hike cycle, the US dollar index will not stop at 102, and it should be expected to reach 110. The RMB has dropped 5% again. The space market has been repeatedly mentioned.

The Fed decided to raise the benchmark interest rate by 25 basis points from 0.25%-0.5% to 0.5%-0.75%.

In addition, the Fed's latest economic and interest rate expectations show that the Fed expects to raise interest rates 3 times in 2017, 1 times more than expected.

The latest federal fund

Futures prices show that the biggest probability of raising interest rates next year is June.

18 years also raised interest rates 3 times, the target rate is 3.5%.

This year, the central bank's foreign exchange has been reduced by 2 trillion and 593 billion 431 million yuan.

China's basic currency is heavily dependent on foreign exchange. Once the foreign exchange reserves are substantially reduced, the basic money supply will lose an important channel, and the market liquidity will encounter a huge crisis.

The most direct impact is the impact of liquidity. China's financial market has been relying on foreign currency reserves for the basic money market. Now, with the Fed entering the interest rate cycle, the US dollar index still has an upward momentum. Last night, the US dollar index exceeded 102, leading to a sharp fall in the RMB. Today, the RMB traded against the US dollar at an intermediate price of 6.9289, which is 261 points lower than the mid day price of 6.9028.

Last day's closing price was 6.9049, and the evening market closed at 6.9070.

The decline in exchange rate means that the pressure of capital outflow does not decrease. As of November 30, 2016, the scale of China's foreign exchange reserves was 30516 billion US dollars, down by 69 billion 100 million US dollars from the end of October, a decrease of 2.2%.

The data fell for the fifth consecutive month and the largest monthly decline since January.

The decrease in foreign reserves meant that foreign exchange holdings were reduced. At the end of 11, the central bank's foreign exchange accounted for 22 trillion and 260 billion 328 million yuan, representing a decrease of 382 billion 676 million yuan compared with the end of 10, the biggest drop since January this year.

This requires the central bank to innovate the basic way of money supply, but under the strong dollar, the central bank's monetary policy has been subject to many restrictions. The reduction of the monetary policy has become more difficult because the monetary policy signals of the quasi released monetary policy are too strong, which will exacerbate the pressure of devaluation of the people and aggravate capital outflows, which will lead to more intense liquidity.

We can only put money in an appropriate way through open operation, and strictly control the amount and duration. We need to push up the cost of capital interest rate and allow the interest rate difference between the RMB and the US dollar to prevent the further devaluation of the RMB. Therefore, even before the Fed raised interest rates, the yield of the 10 year treasury bonds has reached 3.22% as of December 14th.

But the central bank has been recovering liquidity for three days in a row, resulting in a rise in the market capital interest rate, a sharp fall in the bond market and a burst of bond positions. On the 15 day, the inter-bank bond market in China rose sharply in the morning market. The yield of China's bond market in 2026 was up to 2.74%, and the interest rate was 2.74%. The yield rose to 3.39% yesterday. The 10 year Treasury futures fell 2% to the limit, and the 5 year Treasury futures fell 1.2% to reach the limit. This is the first time since the launch of the Treasury bond futures market, and the limit has been opened after the central bank put money into the market.

Since the second half of the year, the central bank

There was some slight adjustment and cautious attitude. At the end of 11, the broad money balance was 153 trillion and 40 billion yuan, up 11.4% from the same period last year, the growth rate was 0.2 and 2.3 percentage points lower than that of the end of last year and the same period last year. The narrow money balance was 47 trillion and 540 billion yuan, an increase of 22.7% over the same period last year. The growth rate was 1.2 percentage points lower than the end of last month, 7 percentage points higher than that of the same period last year, and the monetary balance in the circulation was 6 trillion and 490 billion yuan, an increase of 7.6% over the same period last year.

Net cash in the month was 68 billion 900 million yuan.

The central bank's tightening monetary policy is just the beginning.

In the face of the rising fed, the Central Bank of China can not keep interest rates at a low level of 1.5% in the face of the rising US dollar index. Instead, it needs to raise interest rates in a modest way. The market will be at least a bit higher than the Fed's benchmark interest rate. As far as the higher is concerned, the author thinks that at least 100 basis points are high, otherwise the devaluation pressure of the RMB can not be digested, nor can the capital outflow be prevented.

Capital liquidity and capital interest rate are highly related to the stock market trend. Under the tight liquidity, higher risk premium will result in higher risk premium when the capital interest rate rises. This means that there is a downward pressure on stock market valuation. On the one hand, on the other hand, the bond market turbulence may lead to some huge risk of loss of investment in some institutions with low awareness of wind control, resulting in a decline in performance and even losses in some listed companies. Meanwhile, bond market turbulence will also lead to market risk awareness and sell off risky assets, leading to a fall in risky asset prices.

The rise of US dollar index is a huge profit for us dollar denominated commodities. Oil has OPEC and non OPEC members limiting production quotations, but coal and nonferrous metals have serious excess capacity. Combined with Trump's energy policy, the price of coal will probably take a step further.

Another impact is that airlines, real estate, and nonferrous metals, which borrowed large amounts of US dollar debt in the past few years, will face huge exchange losses and even suffer huge losses from some companies. This will be a problem for us to avoid.

These are heavyweights, and the role of index drag should not be underestimated.

The foundation of the stock market's rise is the macroeconomic foundation. Only when the macroeconomic improvement can bring the profits of listed companies to improve, can the stock market rise to have a basis for performance, but at present, the downward pressure on China's economy still exists. The L economy is in a vertical stage or in a horizontal stage, and the market is still controversial. This requires the central bank's monetary nourishment. One is that the financing cost of the real economy can not rise significantly because of monetary policy, and the other is that the active fiscal policy also needs low cost financing.

However, at present, it is difficult to achieve the two goals, which will directly increase the financing cost of the state, resulting in many difficulties in the proactive fiscal policy. The interest rate of the fund rises by 100 basis points and the bond interest rate rises by more than 100 basis points. Then the issuance of 16 trillion yuan bonds will increase the annual interest expense of 160 billion yuan. Although the bonds issued at present are fixed interest rates, the yield of the bonds issued in the future market will increase greatly. If the bond yields are not good, it will cause some local creditor's rights to default, and further increase the financing cost, resulting in the bankruptcy of some local governments.

Under financial difficulties, the market for tax cuts will also face more constraints.

It has become an extravagant hope, which further dragged the economic recovery.

While the Yuan's decline, Trump's manufacturing return plan encourages the US dollar to return to the US, which will lead to world capital investment in the US, resulting in a decline in China's ability to attract foreign investment and short-term investment in domestic and foreign businesses may not decline. However, the future trend is likely to show gradual decline or even negative growth. Under the depreciation of the RMB, many RMB capital wants to go out to invest and avoid exchange rate risk. This has brought many variables to China's economic recovery. China's actual use of foreign capital (FDI) in 1-11 months amounted to 731 billion 800 million yuan, an increase of 3.9% over the same period last year, an increase of 4.2% in the same period last month.

China's foreign direct investment in 1-11 months was 1 trillion and 70 billion yuan, an increase of 55.3% over the same period last year.

It is very clear that China's foreign investment is much larger than that of foreign capital. The domestic capital going abroad to invest abroad is bound to affect domestic investment. In 2016 1-11, private investment in fixed assets was 331067 billion yuan, an increase of 3.1% over the nominal period, and the growth rate was 0.2 percentage points higher than that in 1-10 months.

Private fixed assets investment accounted for 61.5% of fixed asset investment (excluding households) in the country, unchanged from 1-10 months, and 3.1 percentage points lower than the same period last year.

Despite various measures taken by the state

Growth, but the effect is still unsatisfactory, compared with the growth rate of foreign investment, that is a heavenly underground.

Another data can also confirm the sluggish private investment. The November financial statistics report released by the central bank yesterday showed that RMB loans increased by 794 billion 600 million yuan, an increase of more than 85 billion 700 million yuan over the same period last year.

Among them, household sector loans increased by 679 billion 600 million yuan, accounting for 85.5% of new loans.

Basically, new loans are housing loans instead of corporate loans.

The pressure of economic downturn must be resolved, private investment can not be trusted, and fiscal policy is restricted. What should we do? Raise the proportion of direct financing, allow the capital market to pay for the economy, and appropriately dispose of economic risks to tens of millions of investors, and increase the issuance of new shares. Because of the IPO pricing system, new shares can not be issued, and the new stock market is not the limit value nine times a week. Next week, we can see the new shares. Over 9 are the big probability events. Under the heavy pressure of new shares, how much can the two level market go far when the market capital interest rate rises?

At present, the moderate decline in economic growth has reached a consensus, while inflation is a subtle attack. In November, CPI rose 2.3%, 2.2%, 2.1%, two months in the 2 month, and in November 2016, the industrial producer price rose 1.5%, up 3.3% over the previous year, reaching a new high since October 2011.

The purchasing price of industrial producers rose 1.8%, up 3.5% over the same period last year.

Although China's economy has not entered the cycle of rising inflation is not so conclusive, but inflation worries are coming. Indeed, with the agreement between OPEC and non OPEC to cut oil production, the breakthrough of oil price once exceeded 56 US dollars, but last night it rose and fell along with the US dollar index. Based on the limited production agreement, there is little room for oil to rise and there is still room for further rise. Oil is an important resource of modern economy.

In this way, China has entered the stagflation stage of Merrill clock. According to Merrill clock view, in the stagflation stage, the cash yield rate is raised and cash holdings are the most sensible. The impact of economic downturns on corporate profits will have a negative impact on stocks, and the yield of bonds relative to stocks will rise, which means that the bull market of bonds will be over.

In the future, China's stock market is facing new pressure, capital pressure, inflationary pressure and economic pressure, and the trend should not be blindly optimistic. Holding cash may be a more sensible move.

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