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 st

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.