Li Qilin commented on the collapse of US stocks: the Fed has limited capacity and is optimistic about RMB assets in the medium term

Li Qilin commented on the collapse of US stocks: the Fed has limited capacity and is optimistic about RMB assets in the medium term
On the evening of March 9, the three major US stock indexes plunged. The S & P 500 opened 7% lower to trigger the fuse mechanism, and the Dow fell by 7.29%, refreshing the lowest value since the beginning of 2019.In this regard, Li Qilin, the chief economist of Guangdong Development Securities and the dean of the research institute, put forward the following points: 1. The spread of overseas epidemics and the expansion of crude oil have hit investors ‘risk appetite, making the already very fragile mood collapse.Coupled with the promotion of indexed funds and programmatic trading, liquidity is trampled.2. The drop in crude oil prices itself has a rupture blow to US manufacturing companies, especially the energy industry. In terms of declines, energy companies are among the top decliners, and most real capital expenditures of companies have been driven by shale oil in the past.The total demand is overshadowed.3. The profit growth of US non-financial enterprises has been close to stagnation after 2014. The growth of US stocks mainly depends on the expected improvement and the repurchase of debt instruments issued by enterprises.However, risk aversion led to a sharp increase in the risk premium of the high-yield debt market, which will hinder the debt financing of enterprises.4. The rise of corporate credit risk and the collapse of US stocks will further deepen the pursuit of safe assets by investors, which will allow investors to put more chips on safe assets such as US treasuries and further squeeze US stocks.5. What the Fed can do is very limited.Monetary easing is not a vaccine, there is no way to soothe the hearts of the people, one cannot allow all sectors of the global industrial chain to be produced and supplied normally; second, it cannot effectively stimulate demand, and residents are panicking and occupying consumption, entertainment, dining, tourism, transportation, etc.Demand from the industry will continue to be lacking. The US economy is deeply driven by consumption. No consumer companies have no orders. Monetary easing cannot change the total demand, so the effect is very limited.Demand is the only driving force to reverse the economic downturn.6. Whether the countries in the world can effectively control the epidemic, or other factors (such as the rise in temperature makes the new coronavirus infectious decline, or the vaccine has made unexpected progress, etc.), so that the market sees “the epidemic will be effectively controlled in the near future”hope.7. In such a worse environment, due to the effective prevention and control of the epidemic, the comparative advantages of China’s economic fundamentals and policy available space really give China’s equity, bond assets, black goods determined by domestic demand to resist the decline and the strong provision of the RMBFavorable support.In the short term, due to the resonance of the global financial market, there is pressure to adjust the liquidity risk restructuring, and it has gradually become an embracing RMB asset.Editor Xu Chao proofreading Zhang Yanjun