What Effect Will The Fed Raise Interest Rates On Asia?

It is rumored that even China is trying to confirm whether the Fed will raise interest rates in June by official means to prepare the plan for raising the potential impact of interest rate on the market and the RMB exchange rate. What reason does the market have to slack off? Frederic Neumann, CO chairman of HSBC Asia economic research, told the market that if the Fed was not taken seriously, it would be "snapped".

"Hold the handrails firmly, and the Fed will act again.

When it comes to action, the Asian market will feel the pain.

But what's strange is that many investors at first seemed to think that the Fed's interest rate increase was irrelevant, and that it was only when the moment came that it began to worry.

Neumann said.

The market is always full of scar and forget the pain. Think of the strange calm at the end of last year and the tsunami of the financial market in January this year.

Neumann points out that if you think there is no correlation between them, think again.

The Fed is still important, and any fine-tuning of its policy stance will soon lead to market reaction.

This need not be the end point, and probably will not lead to direct financial pressure, but the market will eventually be bumpy.

On the surface, there were many worries about the financial markets at the beginning of this year. Of course, the Federal Reserve was only one of them, and China's RMB defense war, oil price fell below 30 dollars and the market worried about the whole energy sector.

But in retrospect, you will find that these are more or less expected and tighter than the Fed's tightening policy.

The potential impact is related.

Neumann believes that it can be assumed that many asset portfolios will be reshuffled.

The Asian market returned to calm after the January financial tsunami.

But basically, nothing has changed.

Domestic countries

Credit is still highly dependent on exports and weakness.

It is true that China's economic indicators rebounded in the first quarter, but it is hard to say that the whole region has benefited.

As authoritative people say, China's economic operation can not be U type, not V type, but L trend.

As a result, fundamentals have hardly improved, and the capital market may be more vulnerable than in the past few months.

The pressure on the US dollar may soon break the relative calm of the current market.

Neumann said.

But he thought the Fed would raise interest rates once or even several times, which would not constitute a fatal blow to Asia.

"Most countries rely on credit for economic growth, and leverage is high.

But most countries borrow from their own countries, so direct financial pressure is unlikely to happen.

There is indeed a problem of economic growth in Asia, but now it is not 1997.

After all, the central authorities are actively preparing for the Federal Reserve to raise interest rates.

According to media reports, the Central Bank of China is trying to confirm whether the Federal Reserve will raise interest rates in June by official means or wait until July, so that the exchange rate and other policies can make better response.

Looking back at the strong US economic data in April (mainly retail sales), it is believed that the US GDP downturn in the first quarter is only temporary and the core inflation rate is also rising.

The FOMC meeting minutes and several Fed officials' speeches raised the interest rate hike in the summer.

More than a few weeks ago, the market has now increased the possibility of recent increases in interest rates into the price.

Federal Reserve Chairman Yellen will attend an event organized by Harvard University in May 27th, which may give some guidance to the market.