All about the aggressive 75-bps hike
The biggest interest rate hike since 1994, Federal Reserve had raised interest rates by 75 basis points instead of 50-bps during the last week FOMC meeting. Fighting off the all time high inflation, has become the top priority now, with CPI (YoY) (May) released on 10 June (which was 2 weeks ago), recorded at 8.6% of which US inflation is at its 40-year high.
Investors need to take note that the Federal Reserve is ambitious in lowering the inflation all the way back to 2%. Be it achievable or not, for sure of one thing is the process of making it happen is going to be painful for everyone because it will push the economy into recession if rising interest rate is overdone. And the changes that investors should keep a lookout for include:
Businesses; the cost of borrowings will be higher, and it will directly hit the profits of the businesses. For the company with high gearing ratio, may even affect the evaluations of the company and in turn affect the share price of the company if it's listed in the exchange.
Stock market; the selloff will be expected to be steeper now as more money will exist from the stock markets and flow back to U.S.-denominated money market and that resulted in more time needed for the market to digest the 75-bps hike in rates.
Mortgage market; the monthly mortgage repayment is expected to increase latest by the end of this year... and in fact, many countries had started to impose a higher interest rate on housing loans since last month onwards.
Bond market; we often heard this : "Bond prices go down when interest rates go up", and the reasoning behind is mainly come from the fact that the higher prevailing interest rates will make the older bonds less valuable because new bonds that offered in the market now, will come with a higher coupon payment. That will make the older bonds look less attractive to investor, and affect its pricings to drop due to lower demand. Eventually, the older bonds would need to be traded at a discount.
Forex market; the U.S. dollars will continue to gain strength and weaken the exchange rate against other currencies. If other countries do not followed suit will face depreciation on their currencies, However, countries that are heavily depend on exportation for economy growth like Japan and China will likely do so to increase competitiveness of their goods.
And the link below show a global overview of counties that recently raised interest rates.
Arrow lengths are each country’s most recent increase in percentage points. +10.5 Russia +15.0 +0.25 Nearly four dozen countries have raised interest rates in the last six months, as central ...
(www.nytimes.com)
The forecast of benchmark interest rates for the next 2 years:
"... the Fed indicated it planned to raise the fed funds rate to a midrange of 3.4% by the end of this year and to 3.8% by the end of 2023. Fed officials anticipate being able to cut rates slightly in 2024."
Quoted From:
In its so-called dot-plot forecast of benchmark interest rates, the Fed indicated it planned to raise the fed funds rate to a midrange of 3.4% by the end of this year and to 3.8% by the end of 2023. (www.marketwatch.com)
For Hong Kong market traders, there's a recent announcement that St Petersburg Exchange of Russia will add a dozen Hong Kong-listed stocks including Alibaba, JD.com to broaden access to Russian investors... though HKEx said that it is not involved in the initiative, so therefore it is not a collaboration. But as investors, we need to take note of the political movement between countries, which seemed heading towards some kind of divisions now, and will the world move away from globalization, I think the possibility exist.
Focus Point : Blockchain, NFTs and the Metaverse
The bitcoin continue to plunge below US$20,000 and supported exactly on 17,900 level over this weekend... but though it reached my target of previous forecast on bitcoin in my 11-16 May Issue on "... target for Q2 is below 20,000 level, buy call at 18,000 level.", I won't forecast the bitcoin prices for now, as I'm pessimistic with the cryptocurrencies for these 2 months as pressures remain.
However, investors can consider to start buying into bitcoin only when the month of August arrived.
Other Focus (Results and Highlights of Corporate Actions):
Singapore's NODX expands by 12.4% in May from low base
Frasers Property offers 70 cents to privatise Frasers Hospitality Trust
Ausgroup plans to divest property for A$16.2 million
APAC Realty reports 20% y-o-y rise in earnings in 1Q2022
Credit Suisse offers perpetual securities with indicative yield of 9.75%
mm2 Asia raises $54 million to refinance debt
JPMorgan records sought in case alleging 'unfair' Jardine deal
Natural Cool receives demand from Mapletree Logistics Trust for rental arrears of $1.42 mil
Keppel Corp receives three-month extension of credit period from CPIB
Coming Market Focus (Extract):
Sunday, June 19, 2022 | |
CNY | PBoC Loan Prime Rate |
Monday, June 20, 2022 | |
USD | Holiday - Juneteenth |
AUD | RBA Meeting Minutes |
Tuesday, June 21, 2022 | |
USD | Existing Home Sales May, mom May |
JPY | Monetary Policy Meeting Minutes |
Wednesday, June 22, 2022 | |
GBP | CPI May mom, yoy |
USD | Fed Chair Powell Testifies |
USD | API Weekly Crude Oil Stock |
Thursday, June 23, 2022 | |
SGD | CPI May yoy |
GBP | Composite, Manufacturing & Service PMI Jun |
USD | Initial Jobless Claims |
USD | Markit Composite, Manufacturing & Service PMI Jun |
USD | Fed Chair Powell Testifies |
USD | Crude Oil Inventories |
USD | Fed Bank Stress Test Results |
JYP | National Core CPI May yoy |
Friday, June 24, 2022 | |
SGD | Industrial Production May mom, yoy |
USD | New Home Sales May mom |
p.s:
Next FOMC Meetings 2022; July. 26-27
Investment Tips 💡 this month (June 2022🦉:)
STI had dropped below 3100 on last Friday. And this coming week, I highly recommend investors to stop buying in until late Wednesday afternoon (23rd June), before market closed.
After all, Singapore CPI (YoY) for the month of May is going to release this coming Thurs, so risk-averse investors can wait till the release of data before buying into the market again.
CASH PLUS Promotion:
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(Waived for US and HK Foreign Custody fee until 31 December 2022.)
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