What impact does the Fed's interest rate hike have on the China stock market? The financial manager told you.
What does it mean for the Fed to raise interest rates? I believe that anyone who knows the capital market knows that there are not many narratives in that small series. Today, I will briefly talk about the impact of the Fed's interest rate hike on the China stock market.
The Fed's interest rate hike will lead to the massive return of international capital to the United States and the depreciation of emerging market currencies. No matter which of these two things happens, it will have an impact on the RMB and devalue it. So, first of all, let's understand the impact of RMB depreciation on China stock market.
The depreciation of RMB has a negative impact on the stock market, and domestic interest rates are facing a passive rise. The marketization of RMB exchange rate formation mechanism will lead to the gradual establishment of interest rate parity relationship at home and abroad. In the case of rising interest rates in the United States and Europe, China's domestic interest rates are also facing the risk of passive rise, and the prices of domestic stocks, bonds and other assets are facing revaluation.
2. Liquidity contraction. In the context of the Fed's interest rate hike, once the expectation of RMB depreciation is formed, it will lead to the outflow of hot money and the contraction of domestic liquidity, which is not conducive to the strength of A shares.
3. Affect domestic asset prices. The depreciation of RMB will impact domestic asset prices, leading to the weakening of financial, real estate and other related weight sectors, dragging down the overall market.
It should be noted that once the Fed raises interest rates, it means that the US monetary policy has entered the normalization. More precisely, it means that the Fed has entered the cycle of raising interest rates, and there is the possibility of raising interest rates many times in the future. After comprehensive consideration of this factor, how will China's future A-share market go? Reference to historical data can give investors some help.
If the Federal Reserve raises interest rates, how will the China stock market be affected? The core logic of the impact of US interest rate hikes on the market is that international capital flows back to the United States from outside the United States, which is reflected in the exchange rate of non-US currencies against the US dollar. If non-American currencies appreciate, it often means that international capital flows to the economies where such non-American currencies are located, and vice versa.
The dollar is likely to appreciate before raising interest rates (refer to the dollar index), but it may not appreciate within three months after raising interest rates. The first rate hike is usually the high point of the US dollar index, and the US dollar will appreciate sharply before the rate hike. Accordingly, other currencies depreciate against the US dollar before raising interest rates, and appreciate with high probability after raising interest rates-that is, in the short term after the Fed raises interest rates, markets outside the United States do not have to worry too much about capital outflows, and the liquidity of capital markets (including stock markets) can remain stable.
The US interest rate hike is basically not good news for the China stock market. Of the six data in the three months before and after the interest rate hike, only 1 time rose, and the rest all fell.
However, investors should pay attention to the fact that before 2004, China stock market was still a very immature stock market, for example, the share-trading reform had not been completed, for example, the stock index futures had not been launched.
In addition, before 2004, the RMB exchange rate reform had not started, and the RMB was actually a fixed exchange rate system linked to the US dollar. If there is no exchange rate adjustment and free flow of capital before raising interest rates, it will be difficult to digest the expected impact of the US dollar interest rate hike on the market in advance. Therefore, the impact of the US dollar interest rate hike on the market can usually only be achieved through a short period of substantial adjustment.
In the case of completely different institutional foundations, the reference value of the limited data samples of A shares is actually not high. Investors may wish to refer to the situation in Japan and South Korea. It can be clearly seen from the above table that before and after the start of the new interest rate hike cycle, the Japanese and Korean stock markets rose more and fell less, and the US interest rate hike was more "favorable". In fact, before the Fed raised interest rates, the major stock indexes in the global stock market were in a state of general increase; After the announcement of the Federal Reserve's interest rate hike resolution, the major stock indexes in Europe and America also rose.