The U.S. Federal Reserve’s interest rate meeting was a bit unusual. There was no previous scenario where the stock market was inserted first. At the same time, the central bank seemed to be very careful about the rumors that the market received, so as not to cause unforeseen effects.
Before deciding to raise interest rates, the market downplayed the chance of raising interest rates by 1%. It felt that the Fed was worried about raising interest rates heavily, which would have too scary effects, so it sent reassurance early. Due to the current high inflation, a 0.5% interest rate hike will definitely not meet the threshold of economists’ requirements to raise interest rates to suppress inflation. As the upper and lower limits are difficult to break through, a 0.75% interest rate hike has become a high probability event.
The Reserve Board’s performance is on thin ice
There is a strong expectation of the rate hike, and the focus of the meeting lies in the statement after the meeting. There are rumors in the market that the Reserve Bank will adopt a flexible attitude towards future interest rate hikes. The Fed’s responsibility is to strike a balance between maintaining growth and controlling inflation. With high inflation, it is increasingly difficult to maintain a balance. Now the Fed is in a position to be blamed at every turn.
In the past, the United States was able to release water for a long time because inflation was sluggish, funds were not afraid of losing purchasing power, and U.S. bonds were not worried about buyers. Inflation is not only high now, but also comes from the Russian-Ukrainian war and the anti-globalization promoted by the United States. These factors are important factors other than interest rates to intervene in prices. Under the new situation, the Reserve Bank has insufficient tools to deal with inflation, and it is easy to change from inflation to inflation. Stagflation has never been experienced since the disintegration of the Soviet Union and the rise of China into the world’s factory in the last century. Coupled with the impact of the epidemic on the global supply chain, in such a complex environment, it is really necessary to determine the direction of interest rates and explain to the market. It’s hard for the Fed board members.
The market is worried that the U.S. is in recession. The inversion gap between U.S. 10-year and 2-year bond yields has exceeded 27 basis points, the widest since 2020. The Hang Seng Index closed at 20,670 points yesterday, down 235 points. 21 of the 69 blue chips recorded gains. Orient Overseas (316) closed up 3.4% to 265 yuan, being the best performing blue chip; domestic demand stocks Mengniu Dairy (2319) rose 1.6% to 35.95 yuan; China Resources Beer (291) It rose 1.5% to close at 55.9 yuan, and 3 stocks ranked the top 3 among blue chip stocks.
Country Garden’s pumping room is not running
The most hurtful thing is that Country Garden (2007) announced that it would place 870 million shares at a discount of 3.25 yuan at a 12.63% discount, accounting for 3.62% of the enlarged share capital, raising 2.828 billion yuan. The stock plunged 15% to close at 3.16 yuan, falling below the allotment price; its subsidiary Country Garden Services (6098) plunged 22% to close at 17.44 yuan; Longfor Group (960) plunged 4% to close at 28.15 yuan; 3 stocks were the performance The worst 3 Hang Seng Index constituent stocks.
Other mainland property stocks also declined. CIFI Group (884) plunged 11.95% to close at 2.21 yuan; Powerlong Properties (1238) fell 8.5% to close at 1.07 yuan; Xincheng Development (1030) fell 7.4% to close at 2.76 yuan; Ronshine China (3301) fell 9.57% to close at 1.04 yuan; China Overseas (688) fell 2% to close at 22.15 yuan; China Resources Land (1109) fell 2% to close at 33.6 yuan.
The news of the rights issue shook the share prices of Country Garden and Bifu. Although the mainland authorities are working on solving the domestic housing crisis, the actual plan has not yet been implemented, and market confidence is still weak. Country Garden’s services fell more than Country Garden’s rights issue. Market participants believed that the main reason was that the two businesses were closely related.
Taking China Evergrande (3333), which is deeply involved in the capital chain problem, as an example, Evergrande once announced a preliminary investigation on the deposit of about 13.4 billion yuan of its subsidiary Evergrande Property (6666) being pledged by banks, and found that the relevant funds were transferred to Evergrande, using It operates in Evergrande and repays domestic and overseas debts, so the market is worried that Country Garden and Country Garden’s services will “follow in the footsteps”, and the parent company deploys funds from subsidiaries to bail out due to financial constraints.
Big banks also issued reports, downgrading Country Garden and Country Garden’s service ratings and target prices one after another. Motong lowered Country Garden’s rating from “overweight” to “underweight”, and the target price was lowered from RMB 7.6 to RMB 2.5; “Overweight” dropped to “Neutral”, and the target price dropped from RMB 58 to RMB 21.
Jin Riku