A large macroeconomic hedge fund management company on Wall Street believes that although the sharp interest rate hike in emerging market countries such as Brazil will lead to capital outflow in the short term, in the medium and long term, the continuous sharp interest rate hike can still effectively curb the current account deficit caused by the Fed's reduction of quantitative easing. The possibility of systemic risks in China's macro-economy is greatly reduced. Behind this, more and more emerging market countries have learned lessons from the quantitative easing and austerity policies of the Federal Reserve in 20 13, which triggered passive interest rate hikes in emerging market countries. By raising interest rates substantially in advance, they actively set up firewalls to prevent the current account deficit from expanding, so that the future direction of monetary policy will no longer be bound by the Fed's tightening of quantitative easing policy.
According to several Wall Street hedge fund managers, zil and Russia have continued to raise interest rates sharply in recent days. This is because central banks have signaled that they will continue to raise interest rates substantially after the last rate hike. This is because the previous interest rate hike failed to curb the high inflationary pressure, and it is necessary to expand the spread advantage of the local currency against the US dollar in advance to prevent the current account deficit from expanding due to the Fed's reduction of quantitative easing, leading to capital outflows. Today, fighting inflation is still the biggest driving force for central banks in emerging markets such as Russia and Brazil to continuously raise interest rates substantially. Financial markets have also exaggerated the role of central banks in emerging markets in raising interest rates sharply to prevent the current account deficit from widening. In fact, the ratio of current account deficit to GDP in emerging market countries such as Brazil, India and Indonesia has dropped from 4.4% in 20 13 to 0.4%. Therefore, unless the current account deficit is greatly expanded, it will not have a significant impact on the economic fundamentals of these countries.
Other central banks in emerging markets have raised interest rates sharply, which is quietly affecting the long-short game between domestic retail investors and overseas capital. For example, Brazil's sharp interest rate hike has led individual investors to hold a relatively pessimistic view on the fundamentals of economic growth, and their investment risk appetite has declined. The outflow of foreign capital led to the continuous decline of the Brazilian stock market. In contrast, in the face of high inflation and the pressure from the Federal Reserve to tighten the quantitative easing policy, the Bank of India delayed raising interest rates, prompting retail investors to be optimistic about the prospects of India's economic recovery, and investment risk appetite also rose sharply. Throughout July, Indian retail investors injected more than 654.38+08 billion rupees into the Indian stock market, which not only helped the Indian stock market hit a record high. It also successfully offset the withdrawal of foreign capital of about 20 billion rupees.