Man/KIM Li Sung
The author's brief: Kim Li Sung is a front-line entrepreneur, an investor active in the secondary market, and a pedagogue (dower), founder of Kim Baba Finance, financial columnist, with 17 years of professional investment experience, and has a snowball series entitled Smart Investment Course - A Heart of an Independent Investor, focusing on investment education and family, family wealth top design and advice.
The text reads as follows:
It's a big deal in the global capital market! The European Central Bank, at a recent conference on interest rates, made it clear that interest rates would be suspended and three interest rates would remain unchanged, with refinancing rates, marginal lending rates and deposit mechanisms rates remaining at 4.50 per cent, 4.75 per cent and 4.00 per cent, respectively. The European Central Bank’s suspension of interest rates is still rooted in the fact that current inflation rates are largely contained.
Although the ECB has expressed a moratorium on interest rate hikes, it is not precluded that they will continue in the future. But, according to the writer, this is basically a signal that the ECB will stop the hike, or that the current round of euro hikes is over, and is now the peak of euro interest rates. When will the euro enter the interest-rate cycle? The rate will probably not start the next interest-rate reduction cycle until the second half of 2024.
This interest-rate period for the euro began in the summer of 2022 and continued for over a year. After the euro hike, the return on euro treasuries began to decline, also within the expectations of investors. The euro has a greater weight in the United States dollar index, and the problem is, will the Fed continue to raise interest rates after the euro has stopped increasing?
In the recent past, the United States published three-quarter GDP growth data, with a slowdown in the CPI growth rate in the three-quarter period and a slight increase in GDP above market expectations, which means that the effect of the dollar's continued interest rate hike is good for inflation. As a result, the rate of return on the United States debt has started to decline and is now at a historical high of 5 per cent.
The recent Palestinian-Israeli conflict did not further expand and escalate, crude oil prices began to fall and the impact on inflation began to decline, although the United States CPI is still around 3.7 per cent, significantly above the Federal Reserve's 2 per cent inflation control target.
Therefore, from the above analysis, it seems to the author that the Fed still has the possibility of a further interest rate hike in November, but this is the last time that the US dollar has increased, which is, to say the least, the time of the current round. If the United States dollar peaks, this is a good thing for the global capital market, which means that global liquidity is about to improve widely and that there will be a rebound in the market.
There is no need for investors to continue pessimism for domestic A shares. When the two world’s central banks stop raising interest rates, it is likely that our central bank will send a signal of interest-rate reduction, which will further stimulate macroeconomic growth. After going through the “policy bottom” and “market bottom”, Unit A is bound to be followed by a massive rebound and even a reversal. Investors can wait and see.
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