At an Aug. 26 strategy meeting Hua Fu Securities chief economist Guan Tao said
last year’s three Fed rate cuts have been followed by a pause this year, but
market expectations have oscillated, leaving financial conditions looser overall
while volatility has risen. He warned external liquidity effects on the A-share
market must be decomposed by driver and context rather than simply attributed,
and identified two main transmission channels: capital flows — rising tightening
expectations tend to strengthen the USD and spur EM capital outflows, pressuring
FX and asset prices; and sentiment/confidence — US equities act as the global
risk barometer, so a US tech correction driven by tighter expectations would
likely transmit to global and Chinese technology stocks.
