Global macro liquidity
In June, the Federal Reserve will start the table reduction plan. On May 5, the Federal Reserve announced the May FOMC interest rate policy decision statement, saying that it began to shrink the table at a pace of $47.5 billion per month on June 1, and gradually increased the upper limit of the table shrinking to $95 billion per month within three months, that is, it reduced $60 billion of US Treasury bonds and $35 billion of mortgage-backed securities (MBS) per month. On May 12, Atlanta Fed chairman Bostick said that there may be $1 to $2 trillion of excess liquidity that can be removed from the Fed’s balance sheet. As of May 11, the total assets of the Federal Reserve increased by $3.322 billion compared with two weeks ago, of which the scale of treasury bonds held increased by about $2.612 billion.
The Fed raised interest rates in May, and the probability of raising interest rates by 50bp in June and July increased. The Fed’s interest rate hike boots landed as scheduled. On May 5, the Fed announced the May FOMC interest rate policy decision statement, which raised the benchmark interest rate by 50 basis points to the range of 0.75% – 1.00%, in line with market expectations. With regard to the Fed’s interest rate increase plan in the future, the probability of raising interest rates by 50bp in June and July respectively increases. On May 13, San Francisco Fed chairman Daley said that there was no reason to change the pace of raising interest rates by 50bp at the next two meetings; Powell also stated his position on this for many times. On May 12, he stressed the rationality of raising interest rates by 50 basis points at the next two meetings. On May 17, it was revealed that in order to quickly raise interest rates to a more normal level, FOMC widely supported raising interest rates by 50 BP at the next two meetings.
China’s macro liquidity
In terms of volume, the social finance increment in April was lower than expected, mainly due to the weak effective demand of the real economy. In April, the increment of social financing scale was 910.2 billion yuan, a year-on-year decrease of 946.8 billion yuan. In April, the year-on-year growth rate of social financing was 10.2%, down 0.3 percentage points month on month. The increase of social finance was lower than the market expectation, which may be due to the continuous superposition of the epidemic in April, the shortage of factors and the rise of production costs, resulting in a significant decline in the demand for effective financing and the weak demand of the real economy. The credit data of April still needs to be optimized in structure, and the performance of government bond financing and corporate bond financing is poor. Structurally, RMB loans decreased significantly in April, with a year-on-year decrease of 922.4 billion yuan. Government, enterprise and resident loans decreased year-on-year, mainly due to the impact of epidemic factors and weak real estate sales. In April, government bond financing was 391.2 billion yuan and corporate bond financing was 347.9 billion yuan, a decrease of 14.5 billion yuan year-on-year. In terms of stock financing, enterprises have significantly increased month on month compared with March, with an increase of 116.6 billion yuan in April.
In terms of price, since May, the interest rate of 10-year Treasury bonds has shown a volatile downward trend, and the upside down degree of China US interest rate spread has narrowed slightly. After the central economic work conference in December last year, the policy was set to stabilize growth and start a new round of easing. The transmission from wide money to wide credit was clear, which made the ten bond interest rate fluctuate upward. On March 15 this year, the central bank failed to raise interest rates, and the yield of China’s 10-year Treasury bond rose. On April 15, the central bank announced a 0.25 percentage point reduction in the deposit reserve ratio of financial institutions, and the interest rate of China’s ten-year Treasury bonds showed a volatile upward trend. Since May, the ten-year Treasury bond has shown a volatile downward trend. As of May 18, the Treasury bond interest rate was 2.78%, down 5bp compared with May 5. The upside down degree of China US ten-year Treasury bond yields narrowed slightly
Risk warning: liquidity tightening exceeds expectations; Economic development is less than expected; Sino US friction eased; The epidemic situation worsened more than expected. Please be sure to read the disclaimer in the notes
Stock market liquidity
From the perspective of capital demand, compared with the previous two weeks, the number of IPO companies, financing scale and the scale of fixed increase raised funds have fallen in the past two weeks, and the scale of net reduction of industrial capital has increased. In May 2022, a total of 244 stocks are facing the lifting of the ban, with a market value of about 270.8 billion yuan, slightly rising compared with the lifting scale of 256.7 billion yuan in April.
From the perspective of capital supply, the total issuance of equity funds in the past two weeks was about 1.14 billion yuan, which continued to fall compared with the total issuance of 2.24 billion yuan in the previous two weeks. In May 2022, a total of 26 equity funds are waiting to be issued. According to the raising target, if all funds are raised successfully, it is expected to bring about 82.8 billion yuan of incremental funds to the market. Recently, the scale of financing balance has stabilized and rebounded, the net subscription of ETF has changed from positive to negative, and the scale of enterprise repurchase is 21.5 billion yuan, which has rebounded significantly compared with the previous two weeks. In the past two weeks, the northward capital has maintained an outflow trend, with a net outflow scale of about 13.83 billion yuan. In terms of industry allocation, the northward capital has significantly increased the positions of household appliances, banks and public utilities, and reduced more positions in recent two weeks. Most industries are concentrated in iron and steel, non-ferrous metals and power equipment. In the past two weeks, the net inflow of southward funds increased, with a cumulative inflow of about HK $24.6 billion, an increase of about HK $19.7 billion compared with the previous two weeks.
Risk appetite and valuation
In terms of risk appetite, the recent warm wind of China’s policy has been blowing frequently, and the steady growth policy has been overweight again, superimposed on the slowing down of the epidemic situation in Shanghai, and the market confidence has been gradually reshaped. In this context, in the past two weeks, the A-share market sentiment has gradually warmed up, the equity risk premium has dropped slightly, the turnover rate of the three major board indexes has decreased, the income of equity funds has rebounded, and the stock fund index has outperformed the market. From a global perspective, the US CPI increased by 8.3% year-on-year in April. Although it was lower than the previous value, the decline was less than expected. Superimposed on the weak performance of US stock companies, the market’s concern about economic stagflation further intensified. In the past two weeks, US stocks fell sharply and the volatility of S & P 500 rose. The prices of safe haven assets showed differentiation, with the yen index rising slightly and the gold price falling. In terms of alternative assets, the price of bitcoin fell again in the past two weeks, down 27.73% on a two-week basis.
In terms of valuation, in the past two weeks, the valuation trend of major global stock indexes has been differentiated, the valuation of the three major stock indexes of US stocks has decreased, the valuation of Nikkei 225 has increased significantly, and the valuation of major European stock indexes has decreased. In the Chinese market, the valuation of A-Shares has rebounded as a whole in recent two weeks. The valuation performance of gem index and CSI 500 index is better than that of SSE 50 and CSI 300, but the valuation level of main indexes is still below the historical median, among which the valuation of CSI 500 index is at a historically low level. At the industry level, the valuation of power equipment, automobile, electronics and other industries has rebounded in the past two weeks, while the valuation of banking, food and beverage and social service industries has decreased significantly.
