Xiaonian, Xu Dianqing and Zhou Chunsheng Toward A shares of the Federal Reserve cut interest rates and the impact of
1 22, Beijing time 21:25, the Fed announced that it would significantly lower the federal funds rate 75 basis points to 3.50%, to prevent overall financial market crash and economic recession, which is the Fed cut rates since the 1980s, the largest one. Although the impact of an emergency rate cut by the Fed, the European stock markets had closed 22 higher, but the U.S. Federal Reserve ignored the three major stock indexes are still conduct emergency rescue, the Dow, Nasdaq, S & P 500 index closed down one after another, and create a 52-week closing low. How do the Fed's emergency rescue activities? can rescue the global stock market crash ? on the A share market and what impact the trend in turn? this invited experts were interviewed.
Xiaonian Europe International Business School of Economics and professor of finance at the University of Western Ontario, Xu Dianqing
tenure Zhou Chunsheng professor of finance at Cheung Kong Graduate School
night emergency rescue mean? how to evaluate the behavior of the Fed's emergency rescue?
Xiaonian: Although the Fed is to prevent further deterioration of the U.S. economy, but the real goal is still the market. I Fed rate cut There are two basic views.
First, follow the step by step Bernanke is Greenspan's thinking, to become Bernanke, Greenspan authoritarian centralization, which hurt the credibility of the Fed's great long-term policy to The most Houbonanke and the Fed are the biggest losers, after several rate cuts, the Fed's policy credibility is basically gone. what the market expected the Fed to do it, this should not happen.
second Bernanke goes on Greenspan's monetary policy style, it is necessary to take into account economic growth, but also take into account the contradiction between the dual objectives of financial markets. which is the end result is the same year with Alan Greenspan, what are too busy to think . would have this time is because the subprime mortgage crisis causes the release of the Fed in the past caused by excessive liquidity, and now Bernanke continue to release emergency liquidity, but the depth of the market a little longer to adjust tension, but can not avoid The final adjustment of the market, which is very bad, so the U.S. market and I do not optimistic about the economy.
Zhou Chunsheng: the Fed cut interest rates this time is expected a substantial, not a very unexpected thing. U.S. Federal Reserve cut interest rates dramatically, in fact, because we are more clear, that is, the impact of subprime crisis continued fever, the U.S. economy faces the risk of stagnation or even recession. U.S. asset prices are substantially diminished, including real estate and stock market, the may be America's future economy, a huge impact on asset prices may hit the market and consumer confidence. cut interest rates to increase investor confidence, and indeed can stimulate demand for U.S. investments, such as lower cost of funds business , increased lending and investment confidence, and stimulate consumer demand in the United States, such as a car, buy a house down interest cost, we buy a car will raise the enthusiasm to buy a house. In fact by lowering interest rates, one stable confidence in More importantly, the consumer would like to pull the United States to prevent the U.S. economic slowdown and recession.
Fed dramatically cut interest rates may not be able to save the global stock market
Q: 22, the three major U.S. stock indexes do not care about the Fed's substantial cut act, and still have dropped a record closing low of 52 weeks, while European stock markets closed is somewhat higher, how to understand the U.S. stock market fell and European stock markets has increased?
Xiaonian: fundamentals of the U.S. stock market fell by its decision, the U.S. economy into recession appears to be a foregone conclusion, but did not enter the European economic recession, the European and American stock market also reflects the fundamentals. Despite the liquidity that can alleviate, but not optimistic about the prospects for the U.S. economy, the U.S. market the company's future earnings was not good enough, so the depth of the stock market or not two days before the big drop but still go down, which is determined by economic fundamentals. while the European economy is run, affected or limited by the subordinated debt, prospects for the European economy can be, so a rebound after the Fed cut interest rates.
Xu Dianqing: some people are now more optimistic on the market, but most are waiting to see, in this situation under the Federal Reserve cut interest rates, in a wait state can not give these people some additional confidence is the key. if it is not the intended purpose, will continue to cut interest rates.
Zhou Chunsheng: The stock market reaction to such information is complicated, because the rate cut itself, the capital market terms is good, but the good news is we are predictable if you have to prove that it has already been reflected in the price, the theory is certainly the case. In other words, if the Fed did not announce the news yesterday, rising in Europe, the United States down, and the range is not great, in fact, this can not explain what a big problem, because the news has long been largely unknown. Of course, the U.S. stock market fell to 52-week low yesterday, also reflects the impact of U.S. subprime is still very serious, despite the Federal Reserve cut interest rates take a significant way, but still has not fully restore the old confidence in the U.S. economy.
Q: January 29 to 30 Federal Reserve monetary policy meeting will be held, you are expected to How would the action when the Federal Reserve? will not continue to drastically cut interest rates?
Xu Dianqing: This depends on the market reflects this period of time, the reason why the Fed suddenly cut interest rates before the regular meeting, the Fed also shows estimates of the problem more serious, can not wait until next week before taking measures. currently on the market reaction to this measure is difficult to judge. If achieved the expected goal, when in 29 regular meeting is the ratification of this measure, however, that the reduction will information is correct, no time to discuss on the first run,UGG boots cheap, and that time would not be a significant cut.
Zhou Chunsheng: this possibility, the possibility of reducing, in such a short period of time continuous unlikely to cut interest rates twice, but this would obviously regular meeting to discuss the U.S. economy and monetary policy signals sent in the future, anyway, the main theme of the Federal Reserve is to restore people's confidence in the market.
Xiaonian: possible , anyway, the Fed now has no credibility, and credibility of nothing, to continue to cut interest rates.
Q: Merrill Lynch, Citigroup's huge loss of these predators, it appears to be the world to pay, and when they make the pots full of full time but do not give a share of the world's people, resulting in what are the reasons for this phenomenon?
Xu Dianqing: or conspiracy theory, pay on, this thing that is not clear. we sometimes make money, when we make money did not say you have to pay, simply pay a little taste of conspiracy theory, we can not find the headquarters of the other plot, so to say but rather the expression of an emotional I can understand, but for policy discussions it has no much effect, as Merrill Lynch, Citigroup, and they do not want such a large loss, has been out of their bruised and battered the.
Bernanke is making an even greater crisis?
Q: Soros believes that Now the world faces the most serious since World War II, a financial crisis, Soros determine how you see this?
Xu Dianqing: World War II the global financial crisis has not occurred, the Asian financial crisis of 1997, even China did not get involved. this may be the largest since World War II caught the national financial crisis, from this perspective, George Soros be right. but said the impact of efforts to? this is still not say that, obviously, 1997 under the impact of years, from Thailand, Malaysia,UGG boots, Indonesia, spread to the Philippines, Singapore, Taiwan, Hong Kong, Korea, Japan, and these are engaged in radical, yet no less serious conditions.
Q: So the strength of the Federal Reserve relaxed monetary conditions on the world economy and what impact? will be no negative effect?
Xu Dianqing: now see the Fed took out a full response to the program, so not to mention monetary environment relax, if tomorrow they change again, to raise interest rates after that? So say the current policy to be seen. The Federal Reserve cut interest rates even regular meeting did not open, this action is very fast, and it is urgent to .
Xiaonian: The Federal Reserve cut interest rates makes the necessary adjustments to the process of stretching, but the adjustment is inevitable.
Q: means that Bernanke is now to resolve a small crisis, after it brought more major crisis?
Xiaonian: Yes, but it is not only to resolve the problem of small crises, Bernanke If I had a big crisis into many small crisis, everyone is still acceptable. The key problem is that the Fed's rate cut action to the world that the Fed has no intention to correct the wrong policies of Greenspan, Bernanke, it is not able to act is now equivalent to a major crisis then reduced to a small crisis, if the description of his own actions Bernanke to change Greenspan wrong policy, which is resolved into a major crisis in the small crisis, this is acceptable, but Bernanke is continuing to create new crises. the final outcome is that excess liquidity is always looking for a place, and The United States has seen, Citigroup, Merrill Lynch, Morgan tens of billions of bad debt write-off, after higher costs, more expensive.
Q: The A-share market will be substantially cut and what impact? able to make A shares bottomed?
Xiaonian: The main impact is psychological, not have a material impact, A shares are overvalued itself, sooner or later have to adjust the valuation is too high, but in the A pessimistic atmosphere surrounding stock now been adjusted.
Xu Dianqing: the problem now and 1997 is different from the ten years of opening up of China, making China's financial market and international market linkages more closely the . For example,Discount UGG boots, the Federal Reserve cut interest rates, China's benchmark interest rate has been higher than that of the United States, and so obviously, it is also estimated that the renminbi will appreciate, and high interest rates, foreign capital into China will be more powerful, the pressure on the Chinese monetary policy very large, this shows that China wants to shut the door and spared by the idea of a decade ago is difficult to do that. but not A shares open to foreign investment, so there is a firewall here, so I estimate that the impact will be, but mainly in the heart level, that a large hedge fund or a very small possibility of speculation.
Zhou Chunsheng: my personal vision of the Chinese stock market is still optimistic attitude, while the U.S. subprime crisis will have on Chinese economic impact, but because of China's economic growth rate of the larger base of end of last year was 11.5%, so from taking too great an impact the Chinese economy. For example, China's economic growth may moderate slowdown, in fact, this is also the Central Government want, we do not want to continue to grow 11.5% in 2008, but to China's economic growth above 8%, 10%, I think we can achieve this growth rate, so I think the key is still a confidence issue.
facing monetary policy in China inflation, interest rates should continue to tighten the money supply so that more substantial appreciation of the renminbi. after the U.S. Federal Reserve cut interest rates reduce interest margins, of course, hot money will be encouraged to come. So in this case, must be further relaxation of exchange rate policy volatility, which the choice is no choice. The central bank should continue to raise interest rates, but to continue raising interest rates while the Fed reduced interest rate differential is more, the exchange rate volatility must be expanded. To live in the RMB exchange rate stability would also like to curb domestic inflation, the two have choose one? to this or else to that, the world did not domestic inflation, we must weigh.
Xu Dianqing: Now we are in a dilemma being, inflation is on the rise, yet do not see signs of decline, in which case we should raise interest rates rather than interest rate cuts. But considering foreign countries, the U.S. dollar cut in interest rates, in order to stop the excessive capital flow into China, we should cut interest rates accordingly,bailey UGG boots, so we are in a dilemma. then look for two things, we give more weight which aspects high, if that does not stop the momentum of inflation, we may appear in the 1980s and 1990s, there have been two high inflation, if we first consider this issue in the case, we will not cut interest rates. If you take into account the impact of foreign words , we should cut interest rates, the key to which cases considered whether the relatively heavy weight, we should first present something done.
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