Daily theme strategy discussion, summarize the views of the eight securities companies, reveal the current situation of the industry, observe the market trend, and feel the pulse of A-Shares for you in advance.
Ping An Securities: the most “Eagle” period of the Federal Reserve may be in the past, and the corresponding impact on the allocation of large categories of assets is worthy of attention
In May, the Federal Reserve’s interest rate meeting announced a 50 basis point increase in interest rates and started to shrink the table in June, which was basically in line with market expectations. The speech of US Federal Reserve Chairman Powell eliminated the concerns of the market about faster interest rate hike (single 75bp) in the future, showed a high degree of flexibility in the path of interest rate hike, and the market felt “Dove”. Considering the signals released by the Federal Reserve this time, as well as the recent easing of core inflation in the United States, hidden worries about economic growth and employment, and the tightening of financial conditions, we believe that the most “Eagle” period of the Federal Reserve may be over, and the corresponding impact on the allocation of large categories of assets is worthy of attention.
Tianfeng Securities Co.Ltd(601162) : on the relationship between exchange rate and A-share market
Most of the time, the exchange rate and A-share are not directly causal, because they are affected by similar economic and political background, there will be a trend correlation. Since the beginning of the year, China’s “epidemic – supply chain – export – economy” and overseas “interest rate increase / reduction – US bond interest rate – China US interest rate spread – monetary policy space” are common factors that affect both the A-share market and the RMB exchange rate. In the future, once the internal and external factors change marginally, the inflection point of the exchange rate stage and the market bottom may appear at the same time.
In addition, we have several findings about the relationship between the exchange rate and the A-share market: first, since the 811 exchange rate reform, the RMB exchange rate and the A-share index have maintained a stable same direction relationship; Second, the dynamic correlation between A-Shares and exchange rate (rolling one-year correlation) will be more significant when the exchange rate depreciates rapidly; Third, the correlation between large cap stocks and exchange rate of A-Shares is higher than that of medium cap stocks and small cap stocks, and the correlation between value stocks and exchange rate is higher than that of growth stocks regardless of market value; Fourth, banking, petroleum and petrochemical, non bank finance, power equipment, new energy, automobile, transportation and other industries are highly correlated with the exchange rate, and often have great adjustment pressure in the process of RMB devaluation; Fifth, agriculture, forestry, animal husbandry and fishery, electric power and public utilities, textile, clothing and construction and other industries have low correlation with the exchange rate. In the process of exchange rate depreciation and economic downturn, the allocation of these industries will have a certain risk dispersion effect.
Guosheng Securities: outlook on the rhythm of fed interest rate hike! The hawkish degree of the Federal Reserve is likely to weaken in the second half
The Federal Reserve raised interest rates by 50bp at its May meeting and announced that it would begin to shrink its table in June, but the degree of hawkism was lower than expected; After the meeting, the number of remaining interest rate increases implied by interest rate futures in the year fell slightly. Reiterating the previous view, the most hawkish moment of the Federal Reserve may have passed. With the slowdown of the US economy and the decline of inflation, the hawkish degree of the Federal Reserve will probably weaken in the second half of the year, and the market expectation of interest rate hike will also cool down, and this round of interest rate hike may stop at the beginning of next year.
Based on our judgment on the US economy, inflation and the Fed’s monetary policy, the adjustment of US stocks may be coming to an end, and it is expected to be repaired in the second half of the year. In addition, the NASDAQ is expected to outperform the S & P 500 again, and pay attention to the disturbance of the conflict between Russia and Ukraine; 10Y U.S. bond yield is expected to fluctuate at a high level in the short term, and the probability rate will decline again in the second half of the year; Although the US Federal Reserve’s pigeon turn will be bad for the US dollar index, it is expected that the US dollar index will remain strong due to the greater impact of the Russian Ukrainian conflict on the European economy; With the fall of inflation, the rise of real interest rate and the strength of the US dollar, the gold probability fell.
Huatai Securities Co.Ltd(601688) : the Fed’s table reduction is not the core factor affecting the A-share market, and the strong steady growth policy is enough to offset the external uncertainty
The contraction mainly affects the supply of long-term US bonds. This round of contraction may be earlier and faster. The gap between the issuance of bonds (supply) by the Ministry of Finance and the purchase of bonds (demand) by the Federal Reserve will expand, which will raise the interest rate of long-term US bonds. The background of the early strengthening of the US dollar is that the US is relatively better under the global comparison logic, and the subsequent monetary normalization of the Federal Reserve is ahead of other major central banks. Looking back, the combination of interest rate increase and table contraction was launched faster, and there was little concern about the liquidity of the US dollar, resulting in the strength of the US dollar. The economic and policy cycles of China and the United States are misplaced, the pressure of RMB devaluation has increased recently, and the debt interest margin between China and the United States has further narrowed, restraining the downward space of China’s interest rate. The stock market is facing internal and external uncertainty, and the Fed’s table contraction may exacerbate the pressure of capital outflow. Of course, the Fed’s table contraction is not the core factor affecting the market. If the epidemic improves or a strong steady growth policy is launched, it will be enough to offset the external uncertainty.
China International Capital Corporation Limited(601995) : the market may pay too much attention to raising interest rates and ignore the importance of table contraction
The Fed raised interest rates by 50 basis points as scheduled and announced that it would “shrink the table” from June 1, which was in line with expectations. When asked when he would adjust the step size of interest rate increase, Powell said that the data of 1-2 months would not affect the judgment of the Federal Reserve. In other words, if the Fed wants to raise interest rates by 75 basis points, it needs economic data to continue to exceed expectations. In the short term, Powell’s initiative of “demining” will help alleviate the market’s concerns about more radical interest rate hikes.
We maintain our previous view that the market may pay too much attention to raising interest rates, thus ignoring the importance of reducing the table. The sharp rise in asset prices and real inflation in the past two years are related to the over issuance of money brought about by the table expansion, and the decline in the amount of money brought about by the table contraction may become a hidden worry in the future.
CMB International Securities: on the impact of the Fed’s interest rate hike on China’s economic policy
After the short-term sprint, there is still great uncertainty in the policy path of this round of interest rate increase cycle of the Federal Reserve. First, as a demand management tool, monetary policy is difficult to deal with the supply shock caused by geopolitical conflict. Second, the upside down of the term spread of the US yield curve is a strong signal of economic recession, which is bound to restrict the rhythm of subsequent interest rate hikes. Third, raising interest rates could lead to unprecedented losses for the Fed. Fourth, a substantial increase in interest rates will put pressure on the US public finances. The Fed is likely to slow down the pace of raising interest rates in the second half of the year, waiting for the end of geopolitical conflicts and the endogenous repair of the global supply chain.
Relatively speaking, the relaxation rhythm of China’s monetary policy shows restraint. There may be three reasons: first, the capital is in a reasonable and abundant state. Second, the current downward pressure on the economy mainly comes from the suspension of production and the damage to the supply chain, and monetary easing is powerless. Third, China’s monetary policy is subject to the external constraints of the Federal Reserve’s radical interest rate hike.
How should we break the game? First of all, the urgent task is to restore economic and social life as soon as possible. Secondly, we should properly resolve the development problems of the real estate industry. Third, allow the RMB exchange rate to depreciate moderately from its current position.
Finally, the most difficult thing is to bridge the gap from “wide currency” to “wide credit” through active policy measures. Fundamentally speaking, only by doing our own things well can we better deal with the impact of the external environment. We urgently need to further emancipate our minds, seek truth from facts, return to the theme of market-oriented reform, adhere to the hard truth of economic development and stabilize the overall economic and social situation.
Research on the impact of fed interest rate hikes on securities prices
In order to curb inflation, the Federal Reserve adopts tightening monetary policies such as raising interest rates and shrinking tables. However, looking back on history, it can be seen that its impact on energy prices is limited, and the rise and fall of energy prices fundamentally depends on the relationship between supply and demand in the market. By analyzing the data of interest rate increase cycle and energy price change cycle in the past 50 years since the 1970s, the process of interest rate increase has not changed the rising trend of energy price.
The Fed’s interest rate hike policy has effectively restrained the core inflation rate, but its control over the overall inflation rate is weak, which is another evidence that the interest rate hike has little impact on energy prices. The rise of energy prices will generally drive the price rise of relevant industrial products, which will lead to inflation. In order to curb inflation, the United States adopts tightening policies such as raising interest rates. After analyzing the previous interest rate increase cycles, it is found that while the energy price rises, the interest rate increase policy effectively inhibits the core inflation rate excluding the energy price, and has weak control over the overall inflation rate. The interest rate hike policy is more effective for demand driven inflation, and it is usually in a “dilemma” when dealing with the price rise caused by the impact of energy supply.
From the perspective of investment opportunities, energy resources are expected to be in an upward boom cycle in the next 3-5 years. The industry situation will change from the downward shock in the past few years to the upward shock in the next few years. We will continue to be firmly optimistic about the current round of energy inflation and the historic allocation opportunities of upstream energy resources of coal, oil and gas under the capacity cycle. It is suggested to increase the upstream mining, equipment and Allocation efforts in technology and other fields.
Sinolink Securities Co.Ltd(600109) : the market’s expectation of the Fed’s short-term interest rate hike has cooled down, and it is expected that the interest rate hike will stop in 2023
In the statement on interest rate discussion in May, the Federal Reserve raised interest rates by 50bp as scheduled, announced the detailed schedule reduction plan and officially implemented it in June. In the early morning of May 5, the Federal Reserve released its latest statement on interest rate discussion. Members unanimously agreed to raise the target range of policy interest rate by 50bp to 0.75-1%, reiterating that “it is appropriate to continue to raise interest rates”. After “warming up” the scale reduction, the Federal Reserve officially announced the scale reduction plan. According to the plan, the Federal Reserve will start the table reduction in June, with an initial target of US $47.5 billion per month (US $30 billion US bonds + US $17.5 billion MBS), and is expected to reach the upper limit of US $95 billion per month (US $60 billion US bonds + US $35 billion MBS) in one quarter.
Powell said that he would continue to raise interest rates by 50bp in the next few meetings. The situation of raising interest rates by 75bp is not under consideration. First reach the neutral interest rate (about 2.5%) and then consider the end point of raising interest rates. As for the path of raising interest rates that the market is most concerned about, Powell said that the Committee generally believes that it will raise interest rates by 50bp at the next few meetings Powell denied the necessity of raising interest rates by 75bp and said he would try his best to reduce uncertainty in a highly volatile environment. As for the end point of raising interest rates, Powell believes that it is still far from the neutral interest rate (about 2.5%) and will decide to raise interest rates as high as possible when the target is reached.
For now, the Fed will continue to maintain the high intensity of policy normalization, but the most “terrorist” stage of the tightening narrative has come to an end. Looking forward to the future, with high economic resilience and inflation, the Fed will continue to maintain the high intensity of policy normalization in order to maintain its credibility. In this context, the rise of 10Y US bond interest rate has not ended, but the stage with the most intense impact on the global market may be mainly concentrated in the first half of the year. At present, the market’s expectation of the Fed’s short-term interest rate hike has cooled down, and it is also expected that the interest rate hike will stop in 2023.
