Analysis says international hot money waits to enter China arbitrage

Author/Li Mingxu (State consulting Analyst) Global capital will be given priority to China and will not be arbitrarily altered by short-term economic fluctuations. The recent large-scale shift in international capital flows has emerged. The dollar index is already low, with U.S. stocks and bond markets steadily rising, crude prices doubling one time from the previous stage, gold prices approaching $1000/ounce, non-ferrous metals such as copper and aluminium, and prices for agricultural products such as wheat and corn have hit new highs for six months.　　Finally, and emerging market performance, from the currency, since March this year, the Australian dollar has risen 20%, Brazilian strong 15%, South Africa Rand Rose 16%, from the stock market, India, Brazil and China's stock markets are in a strong rebound, emerging market equities led the world. What do these indicators tell us about a global liquidity picture? In the United States, the risk of financial capacity has become more and more strong, from the relatively secure bond market to the stock markets, which are often global in scope, funds that were supposed to be safe from the dollar, especially in US Treasuries, are now on the move, one of the big reservoirs is the commodity market, and the influx of funds leads to agricultural products, iron ore, crude oil, The rise in prices such as gold; another big reservoir is emerging markets, where the currencies of countries such as Brazil and New Zealand are uniform; another bright spot is China-related economies, where Hong Kong dollar hit a 8-month high on several occasions last month.　　The renminbi's exchange rate has been expected to rise from a downgrade. A massive shift in capital flows, there is a natural logic behind it: the easing of the global financial crisis and the bottoming out of the real economy have made capital more risky and demand higher levels of profitability, providing the basis for an upturn in asset price changes, and a loose monetary policy, This has led to the excessive delivery of the base currency, which, while improving the economy, will produce increasing inflationary expectations, as is now indicated by changes in gold, commodity prices and Treasury yields.　　Thus, a better economy and excess liquidity are the two key headings leading to global asset price movements. In this context, the direction of China's economy and Cross-border capital flows will be better grasped as a whole. Although China has also experienced a sharp economic downturn, but this year has been a trend of economic recovery, there is no doubt that the Chinese economy is still the world's "top student." And China's economic recovery to be ahead of European and American peers in the judgment, has been widely recognized by international investors. As a result, global capital will be prioritized in China, a strategic judgment that will not be arbitrarily changed by short-term economic fluctuations.　　The recent signs suggest that the timing of this configuration may have arrived. Taiwan's GDP fell by more than 10% in the first quarter, but it is not bad, but what about the recent 8-month highs of the NT? The main reason is that the Chinese concept of its own has provoked a flood of international capital. The financial sector, as the mainstay of Hong Kong economy,Both the tourism industry and the external trade have been hit hard, and the Hong Kong dollar has repeatedly touched on the "strong-side convertibility guarantee" in May, forcing the HKMA to enter Hong Kong on several occasions, and the Hong Kong property market has frequently been exposed to "bubbles" in the media. The main reason is that Hong Kong is backed by the mainland, whether it is Chinese-owned H-shares, mainland red chips or Hong Kong real estate, has become the target of international capital Chase. Recently, many overseas organizations set up foreign currency funds to focus on investment in Chinese real estate (such as the recent ING is a case), the recent a-share rebound is also considered hot money to promote a large role, the RMB overseas NDF market has been expected to appreciate the renminbi after a year to 6.68 of the level, how to solve Because overseas investors are bullish on the Chinese market often in the second half of the Chinese economy has just experienced a certain scale of capital outflow, now talk about the possibility of a big influx of hot money, seems a bit outdated. But the big trend is that China's economy will take the lead in recovering from other major economies, the renminbi remains artificially undervalued against the dollar, and the world's leading central banks have adopted an unprecedented range of loose monetary policy, which is a three factor that determines the risk of a return of hot money to China again. This, of course, depends on two prerequisites: The global economy will step out of the economic crisis and the financial crisis, and the world's central banks continue to maintain easy monetary policy as they support economic growth.　　And from current trends, the likelihood of hot money pouring into China is growing. Author Email: limingxu@anbound.com.cn ">limingxu@anbound.com.cn"