US Bond Yields Soar, Central Banks In Emerging Markets Raise Interest Rates, Will The Valuation Of A-Shares Increase?

Recently, the monetary policies of developed countries and emerging market countries have gone against each other.

On the one hand, the US, Europe and Japan maintain loose policies; on the other hand, the central banks of Brazil, Turkey and Russia have raised interest rates.

In the face of changes in international capital, analysts pointed out that investors need not over interpret the situation of interest rate hikes in emerging market countries. It is the three central banks - the Federal Reserve, the Central Bank of China and the European Central Bank - that really determine the situation.

At the time of international liquidity "wrestling", the pressure of interest rate increase in China is not big at present, and China still has great attraction to foreign capital, which is conducive to the A-share market to continue to walk out of the slow bull market. At this time, the valuation of domestic group stocks will continue, but long-term funds have begun to layout.

Central banks of emerging markets raise interest rates

America's easing policy is still increasing. Recently, the U.S. Congress passed a new $1.9 trillion economic stimulus plan. US Federal Reserve Chairman Colin Powell said he would not raise interest rates in the next two years, and would maintain zero interest rates and the current scale of bond purchases. US Treasury yields continued to rise, breaking through 1.7%.

In contrast, the news of interest rate hikes by the central banks of emerging markets: on March 17, the Central Bank of Brazil announced that it would raise the benchmark interest rate from 2% to 2.75%; on March 18, the Turkish central bank raised the benchmark interest rate from 17% to 19%; on March 19, the Russian Central Bank announced that it would increase the benchmark interest rate by 0.25% to 4.5%.

From the statements of the three central banks, inflation is the main reason for the central banks to raise interest rates. Some central banks also mentioned the impact of exchange rates and capital flows on monetary policy decisions. In short, the further background of interest rate hikes is to deal with the possible capital outflow caused by the periodic rebound of the US dollar in advance.

In addition, the industry believes that there are currently expectations of interest rate hikes in the economies of India, South Korea, Malaysia and Thailand.

"The global monetary context is changing, and unfortunately the economies that have to respond to it are the most vulnerable. Brazil is in this category. " Alberto Ramos, an economist at Goldman Sachs, commented.

Analysts believe that the U.S. economic recovery is expected to drive up the yield of long-term U.S. debt, attracting investors to withdraw from high-risk emerging markets and buy US dollars, and there is a risk of capital outflow.

Huachuang securities summarized the rotation law of global interest rate reduction and increase cycle in the crisis, pointed out that in the early stage of crisis, it usually broke out in developed economies, which led to the first interest rate reduction of major global demand countries such as the United States, Britain, Japan and Europe; as the financial crisis and economic recession spread to the world, manufacturing countries (South Korea, ASEAN countries, etc.) and resource countries (Brazil, Russia, etc.) began to reduce interest rates.

During the period of economic recovery, the resource countries usually take the lead in inflationary pressure and enter the interest rate rise cycle; then, the improved global demand brings the economy of the manufacturing countries to warm up and enter the interest rate increase cycle; while the developed economies, as the final demand countries, usually enter the interest rate increase cycle finally.

"At present, the world has entered a cycle of interest rate hikes dominated by resource countries, and Brazil and Russia have started to raise interest rates; the subsequent interest rate raising cycle of manufacturing countries may be started. The market expects that South Korea, Thailand, India, etc. will raise interest rates within 1-2 years; however, the final demand countries such as the United States and Europe may have a long way to go." Huachuang Securities pointed out.

There is little pressure on China to raise interest rates

When the world capital market is changing, China's PPI is also driven by imported inflation and continues to rise year on year. However, the impact of imported inflation on CPI is relatively low.

"China does not have the conditions to raise interest rates at present". Guotai Junan's reason is that, on the one hand, the imported inflation is controllable; on the other hand, the economic momentum slows down, and the fundamentals do not support interest rate increase; in addition, long-term interest rates have risen ahead of time, so there is no need to raise interest rates; finally, in the last round of global interest rate hikes, China's interest rate hike rhythm has lagged significantly behind that of emerging market countries.

Anxin securities further pointed out that the impact of imported inflation on CPI is relatively low, and the probability of large-scale capital outflow in China is extremely low. Finally, as the world's second largest economy, China's monetary policy has strong independence, and the current monetary policy has been in a normal range, and the probability of obvious convergence is not high.

In fact, on March 20, Yi Gang, governor of the people's Bank of China, expressed his views on monetary policy at the round table meeting of the China Development Forum, reassuring the market.

Yi Gang stressed that China has a large space for monetary policy regulation. China's monetary policy has always been in a normal range, with adequate instruments and moderate interest rates. We need to cherish and make good use of the normal monetary policy space and maintain the continuity, stability and sustainability of the policy.

At present, the year-on-year growth rate of broad money M2 is about 10%, which basically matches the growth rate of nominal GDP. The yield of 10-year Treasury bonds is about 3.2%, the 7-day reverse repurchase rate in the open market is 2.2%, and CPI in 2020 will increase by 2.5%. From these figures, we can see that China's monetary policy is in the normal range, and there is room for liquidity and appropriate interest rate level.

Yi Gang believes that monetary policy should pay attention to both the total amount and the structure, and strengthen the directional support for weak links in key areas. On the basis of maintaining the overall reasonable and sufficient liquidity, monetary policy can play a role of directional support. Monetary policy needs to balance between supporting economic growth and preventing risks. China's macro leverage ratio is basically stable, providing positive incentives for economic entities and curbing the breeding and accumulation of financial risks.

"It can be seen from President Yi Gang's speech that we should implement a sound and stable monetary policy at present and will not make a sharp turn, which also dispels the doubts of many investors. It is also an important part of the government's work report at the NPC and CPPCC sessions to support the economic recovery and not make a sharp turn. This year's monetary policy will still maintain reasonable and sufficient liquidity, so investors need not worry too much. " Yang Delong, chief economist of Qianhai open source fund, said.

Will A-share valuation continue?

On the whole, China's economy is less impacted by this wave of international monetary policy changes, and the stock market has a greater impact.

On March 19, Yi Huiman, chairman of the China Securities Regulatory Commission, said in Diaoyutai that some scholars and analysts pay more attention to external factors than to domestic factors, that they pay more attention to US bond yields than to LPR, Shibor and Chinese treasury bond yields, and that they pay more attention to overseas inflation expectations than to domestic CPI.

"In fact, the trend of A-share market is more determined by domestic factors than by overseas factors." Yang Delong said.

Yang Delong said: "for emerging market countries, interest rate hikes may affect the performance of their stock markets, but it is suggested that investors should focus on the actions of the Federal Reserve, the Central Bank of China and the European Central Bank, rather than over interpret the interest rate hikes in emerging market countries, because the situation in each country is different, and the three central banks, namely the Federal Reserve and the Central Bank of China, play a decisive role And the European Central Bank. "

"There was no pressure to raise interest rates in China during the year, and the pressure of imported inflation was not great. This is conducive to the A-share market to continue out of the slow bull market Yang Delong said.

Hu Po, the future star fund manager of private placement network, also believes: "recently, there are many emerging market countries to raise interest rates, but from the overall perspective of China, the pressure to increase interest rates is relatively small, and the overall liquidity margin tightening is a more likely direction, but the monetary policy will not turn sharply, and the tightening of liquidity will still be a relatively long process, as a whole, it will be beneficial to the market The field has a certain impact, but there is no need to be overly pessimistic

Yang Delong believes that the current A-share market has gradually digested the valuation pressure of some overvalued sectors through a wave of decline, and many high-quality stocks have also fallen out of the opportunity, and began to attract bottom copy funds to enter. For high-quality companies or funds, we can adopt batch bottom copy or firm holding, adhere to long-term doctrine. In the short run, some good companies with valuation pressure can absorb high valuation in the long run. The real intrinsic value of a company can not be determined simply by some valuation models, but more by considering the industry status, brand value and moat,

Hu Po pointed out that at present, the overall A-share is still in an adjustment state, especially the large callback range of Baotuan shares, and the marginal tightening of liquidity will also affect the valuation of Baotuan shares. From the overall valuation level, even after the sharp decline in the early stage, the overall valuation of Baotuan shares is still at a relatively high level, so it is not ruled out that Baotuan shares will continue The possibility of callback. However, if Baotuan shares continue to callback, their investment value will be further highlighted, ushering in a better layout opportunity. Therefore, we will pay more attention to the re intervention opportunities obtained by the callback of Baotuan stocks.

General manager Xu Qiongna believes that after the recent valuation of Baima shares, Baima shares have been in the process of returning to reasonable valuation. The market will use time for space to complete the bubble digestion of the high valuation of white horse stocks, rather than continue to violently callback, but it is not ruled out that some "fake white horses" may really take shape.

Xu Qiongna believes that the value of Baotuan shares is still high, and it is unlikely to regain the upward trend in the short term. Cycle stocks have been undervalued for a long time, and the opportunities are relatively large. However, due to the high elasticity of cycle stocks, it is easy to show "big rise and fall". It is difficult for ordinary investors to grasp them, but the performance price ratio of medium and long-term investment will be better.

"We can also pay attention to the investment opportunities of other growth-oriented enterprises. At present, they have been back for quite some time. However, since the valuation of these enterprises is not cheap, and the stock price may not be cheap at the lowest point, it is not appropriate to buy too large a position. We should wait for the opportunity by means of fixed investment." Said Xu Qiongna.