In the same week, the CSI 300 index fell 5.05%, gem fell 6.96% and Hong Kong market fell 4.42%. Yuan Yuwei, a senior global macro trader, told the first financial reporter that in addition to the selling pressure accumulated by Chinas stock market itself, the rebalancing of foreign capitals global portfolio will also lead to a certain amount of capital outflow, so the adjustment on Friday was large. At the same time, many institutions have fed back that the adjustment of US stocks is not over, and it is necessary to closely observe whether the VIX falls back.
Chain reaction aggravates the collapse of US stocks
This time, the decline of US stocks is so fierce and lasts so long because of domino effect caused by different investment forces.
Nomuras quantitative team mentioned that the first wave of selling is likely to be those speculators; as the decline expands, the selling power will shift to passive investment such as ETF; meanwhile, CTA (trend commodity trading advisory strategy), risk parity strategy and some investors in the medium and long term (such as pension, endowment fund, social security fund, etc.) will also start to adjust their portfolios, and the medium and long term The investors position adjustment is based on their expectation of the economic outlook.
In fact, we havent been redeemed by a large number of investors. Maybe the collapse is more affected by the closing of programmed transactions such as CTA and risk parity strategy. Once the sell order is triggered automatically, its difficult to stop in a short time. Zhang Yun, senior US equity fund manager at Alger, told first financial.
Specifically, the CTA strategy pursues the short-term trend. When the markets extensive downward trend is formed, the CTA fund will follow the market, start the forced selling mode, and intensify the market selling pressure. Goldman Sachs has estimated as early as 2018 that CTA fund holds about $70 billion of long positions in US stocks and about $190 billion in global stock markets.
Focus on volatility and the Fed
In the future, we need to observe the changes of VIX and when the Federal Reserve will act.
U.S. stocks are facing three shocks - viruses, economic data, corporate profits. This is very negative for the stock market. I expect that there will still be adjustment pressure on the stock market in the next few weeks. Wang Guohui, CIO of APS, told the first financial reporter.
The above-mentioned US options traders mentioned that at present, the VIX remains at a high level of more than 40, which is still much higher than the previous average of 15, and may not be able to fall back significantly in the short term.
At present, US data show that the economy is still relatively resilient, the unemployment rate is still close to a 50-year low of 3.5%, and manufacturing PMI (ISM) has just rebounded to more than 50 and entered the expansion field. Financial markets are pricing for the potential damage to the U.S. economy and corporate profits as the epidemic accelerates overseas. While it seems that Fed chairman Powell didnt care and said only a few words before Fridays opening, it is expected that the Fed will be hard to hold still. Said the traders.
After last Fridays violent fluctuation, the markets expectation of interest rate cut in March alone has soared to 100%. Whats more, the markets probability of betting on interest rate cut of 50bp (basis point) is as high as 94.9%. Standard Chartered mentioned that the correction of more than 10% of the S & P 500, the VIX surge and the inversion of the VIX curve will not be ignored by the Federal Reserve. The Fed will never let the market down when more than 70% of the rate cut at a particular meeting is priced by the market.
The focus was also on safe haven gold, which fell 3.3% on Friday. Previously, people thought that gold would reach a new high against the background of risk aversion and low interest rates, so the price of gold surged from $1589 / oz on February 15 to $1689 / oz on February 25, followed by a slight correction. This slump is not only the profit taking after the super rise, but also the liquidity problem, Yuan Yuwei told reporters. Investors sold their anti falling assets and demolished the east wall to replace the west wall. At the national level, countries falling into debt crisis due to falling commodities hold less gold; from the perspective of investment institutions, loss traders sell gold to make up for margin or payable fund redemption caused by other losses.
As gold punctured the key support position of 1593 at one time, it needs to be further observed when it will rebound. Senior foreign exchange trader Huang Jun told reporters.
Chinese market pays close attention to overseas risk sentiment
As for how the Chinese market will change, a number of institutions told reporters that if the overseas risk aversion mood is always high, it may be due to the rebalancing of the portfolio of foreign capital resulting in capital outflow from A-share. In the past week, the net outflow of funds from Beishang was 29.3 billion yuan. The change of VIX and other indexes should be closely observed in the future.
On Friday, the growth enterprise market fell 6%. Shi bin, head of China equities at UBS asset management, told reporters: we have followed the hot spots before, and can get great satisfaction in the short term, but we need to look at the long term and be rational. Some of the gains are fundamental driven, sustainable, and some of the gains are purely capital driven, without fundamentals.
At present, Chinas situation is gradually improving, but the overseas situation is relatively grim, but we will have corresponding solutions. As far as the current investment logic is concerned, Shi bin believes that to consider from three aspects, first of all, it is necessary to judge whether a specific company can withstand the past. In this case, the risk control ability of each industry leader must be stronger; second, it is necessary to see which industries can benefit from changes in behavior (such as online entertainment, online education, telemedicine, remote office, etc.); third, it is necessary to look at valuation It is true that some industries are greatly affected by the epidemic, but if the market overreacts, it is an opportunity for investors in the long run. At present, consumption, medical treatment and technology are still the three most favored sectors for foreign investment.
It is noteworthy that on Friday, the RMB rose against the US dollar, and the US dollar / RMB broke the 7-level again. On the way down, it fell below the short-term upward trend line and the resistance to support level of 7.01. If it can keep below 7, the RMB will keep rising. Liu Min, China market analyst at fxtm Futuo, told reporters.
Some big bank foreign exchange traders mentioned that when the US dollar / RMB approached 7.1, there were also many Chinese enterprises requiring foreign exchange settlement, which reflected that the expectation for RMB was still relatively stable to some extent.