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China Fund News Taylor

Brothers and sisters, we were caught off guard. Today, the global market experienced an "epic" collapse, and the Japanese and Korean stock markets suffered a crash!

Let’s review what happened!

Global crash

Today's market focus is on overseas markets. The Japanese and Korean stock markets plummeted, and multiple indexes triggered the circuit breaker mechanism. The Japanese stock market was particularly hard hit. By the close of trading, the Nikkei 225 index plummeted by 12%, more than 4,000 points, and once fell by more than 14% during the session, entering a bear market! The Korean Composite Index plummeted by more than 10% during the session, and both TSMC and the Taiwan Weighted Index experienced their largest declines ever.

European stock markets plummeted.

Before the U.S. stock market opened, the Nasdaq index plummeted by more than 5%!

Bitcoin collapsed across the board!

So what happened behind the scenes?

First, the butterfly effect of Japan's interest rate hike has led to a major reversal of global capital carry trade. Previously, the yen interest rate was low, and global capital borrowed low-interest yen, exchanged it for other currencies such as the US dollar, and invested in assets in countries with high interest rates. As long as Japan's interest rate remains low and the yen exchange rate continues to depreciate, it can continuously provide liquidity to the global market, and the US stock market can continue to rise.

Not long ago, the Bank of Japan suddenly raised interest rates and reduced its balance sheet, interrupting all the carry trades of global capital. The sharp rise in the yen exchange rate led to global capital deleveraging, selling stocks one after another to repay the yen. In addition, the appreciation of the yen is also a big negative for local companies, because large Japanese companies are basically export-oriented companies, and the rise in the yen exchange rate will lead to a decline in profits.

The analysis points out that US stock prices are clearly vulnerable to the rise of the yen exchange rate, and changes in Japan's monetary policy will have serious consequences for US asset prices and even asset prices throughout the developed world. Taking the recent rise of the yen as an example, the selling pressure from investors seeking to repay their yen debts has led to a decline in the US stock market. The US stock market has reacted so negatively to the rise of the yen, which shows investors the correlation between US stock valuations and the global monetary system.

Second, the risk of recession.

The U.S. non-farm data last week was significantly lower than expected, with the unemployment rate soaring to 4.3%, showing a weaker labor market and making the market more worried that the Federal Reserve's monetary tightening cycle may still lead to an economic recession. A series of lackluster financial reports from technology companies also dragged down market sentiment.

The above two pieces of negative news led to a liquidity stampede in the global market today.

A shares fell

The global market plummeted, and A-shares were not immune. The market fluctuated and adjusted today, and the decline widened in the afternoon. The three major indexes all fell by more than 1.5%. As of the close, the Shanghai Composite Index fell by 1.54%, the Shenzhen Component Index fell by 1.85%, and the ChiNext Index fell by 1.89%.

A total of 507 stocks in the market rose, 51 stocks hit the daily limit, and 4,753 stocks fell.

Education stocks surged, with Kevin Education, Action Education and Offcn Education hitting their daily limit.

The tourism sector strengthened.

Liquor stocks rebounded.

On the news front, the State Council issued the "Opinions on Promoting the High-Quality Development of Service Consumption."

The Opinions proposes 20 key tasks in six areas. First, tap into the potential of basic consumption such as catering and accommodation, domestic services, and elderly care and childcare. Second, stimulate the vitality of improved consumption such as cultural entertainment, tourism, sports, education and training, and residential services. Third, cultivate and expand new types of consumption such as digital, green, and healthy. Fourth, enhance the momentum of service consumption, innovate service consumption scenarios, strengthen the cultivation of service consumption brands, relax market access to the service industry, and continue to deepen the opening up of telecommunications and other fields. Fifth, optimize the service consumption environment, strengthen service consumption supervision, guide honest and compliant operations, and improve service consumption standards. Sixth, strengthen policy guarantees, strengthen fiscal and taxation support, consolidate the support of the talent team, and improve the level of statistical monitoring.

The semiconductor sector fell sharply.