Market Overview
Key Highlights
China Market
1. The CSRC once again denies the T+0 proposal
The CSRC stated that it is studying the extension of trading hours for exchange bonds and A-shares while considering the capacity of the secondary market. This includes maintaining the normalization of IPOs and refinancing, risk prevention and control for real estate and city investment companies in stock and bond markets. The time is still not ripe for implementing T+0 trading at this stage.
2. The CSRC reduces trading costs for Shanghai and Shenzhen stock markets
To improve market information and invigorate the financial vitality of the Shanghai and Shenzhen stock markets, the CSRC has directed the three major exchanges in Shanghai, Shenzhen, and Beijing to reduce trading fees, with Shanghai and Shenzhen seeing a reduction of 30% and the Beijing Exchange reducing by 50%.
3. China’s foreign investment decreases from January to July in both USD and RMB
Data from the Ministry of Commerce shows that in the period from January to July this year, the actual amount of foreign investment used was 766.71 billion RMB and 111.8 billion USD respectively, marking a year-on-year decrease of 4% and 9.8%. Looking at the sources of investment (including investments through Freeports), the actual investments from France, the UK, Canada, and Switzerland increased by 213.7%, 159.9%, 113.3%, and 61.2% respectively.
Overseas Markets
1. Japan’s service industry inflation hits a 30-year record
Data released by Japan’s Ministry of Internal Affairs and Communications shows that the core-core CPI (excluding energy and food), which is closely monitored by the Bank of Japan, continues to grow at the fastest rate since 1981. The service CPI has recorded the largest increase since 1993 (excluding the year after the sales tax increase in 1997), highlighting deeper inflationary pressures in Japan and strengthening the expectation that the Bank of Japan may lean towards tightening in the future.
2. JPMorgan Chase warns that the US is losing the economic support of excess savings
Thanks to the more than 2 trillion USD directly distributed to the public by the Biden administration during the pandemic, Americans’ excess savings reached 2.1 trillion USD in August 2021. This significant excess savings fueled a strong post-pandemic economic recovery. However, recent research by JPMorgan Chase shows that as of June this year, Americans' excess savings have dropped to -91 billion USD.
3. Wall Street hints that high inflation might compel the Federal Reserve to raise interest rates to 6%
Recent significant drops in US Treasuries and continuously rising yields have made global bond traders realize that the era of high interest rates for US debts has arrived. Top Wall Street institutions, including Bank of America, BlackRock, and Pacific Investment Management Company, suggest that inflation might stubbornly remain above the Federal Reserve's target, not ruling out the possibility of interest rates reaching as high as 6%. Investors should be prepared for US Treasury yields to return to the 5% level, akin to the period before the 2008 global financial crisis.
