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the federal reserve has officially cut interest rates, and global assets are moving in response!

on september 18, local time, the federal reserve announced that the target range of the federal funds rate would be reduced from 5.25%-5.50% to 4.75%-5.0%, a decrease of 50 basis points. this was the first rate cut since march 2020.

after the shoe dropped, overseas markets moved drastically. u.s. stocks rose rapidly and then turned from rising to falling. gold rose rapidly and also plunged sharply. u.s. bond yields collectively closed higher. the u.s. dollar index turned higher again after falling. in terms of chinese assets, on the morning of september 19, the three major a-share indices rose rapidly after a slight decline. the shenzhen composite index rose by more than 1%, the chinext index rose by more than 2% at one point, the hang seng index and the hang seng technology index both rose, and the hang seng technology index rose by more than 3% during the session. the u.s. dollar fell back against the rmb after rising by 1%.

many fund companies interpreted the fed's interest rate cut and the market reaction at the first time: on the one hand, the fed's interest rate cut is expected to further open up room for easing domestic monetary policy; on the other hand, the continued decline in interest rates at home and abroad may bring about global capital reallocation, which is beneficial to the funding side of chinese assets. some fund companies expect that the impact on hong kong stocks may be greater than that on a shares.

domestic monetary easing space may be further expanded

the federal reserve has always been a weathervane for the global economy. on the morning of september 19, the hong kong monetary authority announced that it would cut the benchmark interest rate by 50 basis points to 5.25%. at the same time, domestic expectations for a decline in existing mortgage interest rates have also continued to increase. many fund companies believe that the fed's continued interest rate cut cycle is expected to further reduce the pressure on foreign exchange outflows faced by the rmb and open up domestic monetary policy space.

su huaqing, the proposed fund manager of the wells fargo csi a500 etf, pointed out that with the federal reserve's interest rate cuts and the weak domestic economic recovery, the country is likely to introduce strong policies, including a recent report by the central bank that pointed out that it will start to introduce some incremental policy measures to further reduce corporate financing and household credit costs.

minsheng jiayin fund also believes that after the fed started the interest rate cut cycle in september, the room for domestic monetary easing may be further opened. however, the company also said that the impact of the central bank's purchase and sale of treasury bonds on the market may be greater than the reserve requirement ratio cut, and the choice of the timing of the domestic interest rate cut is likely to be "self-centered" and form a combination of other policies such as fiscal policies.

"my country quickly cut interest rates in july when u.s. inflation fell short of expectations and the probability of a rate cut increased. now that the federal reserve has officially started a rate cut cycle, my country expects the probability of easing to increase. factors such as the recent tax period have made the money market tight. combined with the previous speeches of the central bank leaders, the probability of a reserve requirement ratio cut in the near future has increased significantly. under the expectation that the federal reserve will cut interest rates by 100bp this year, we believe that the probability of another rate cut in my country in the fourth quarter is still relatively high." li weikan, manager of hang seng qianhai bond fund, believes.

li zhan, chief economist of the research department of china merchants fund, holds a more cautious view. he points out that the domestic monetary policy path may only become clearer when the domestic economic situation and the us trade policy path toward china become clearer. however, due to factors such as the current bank interest rate spread, the room for interest rate cuts is expected to be limited.

the impact on hong kong stocks may be greater than that on a shares

looking ahead to the future market, since the previous interest rate hike cycle has created a certain degree of valuation pressure on chinese assets, many fund companies believe that if interest rates at home and abroad can continue to decline, it may be beneficial to the funding and valuation of chinese assets.

he siyao, qdii multi-asset investment manager at hsbc jinxin fund, said that chinese bond assets have been receiving foreign capital inflows this year. the high returns and low volatility after currency hedging are relatively high-quality assets for overseas funds. in addition, the fed's interest rate cut will help reduce the risk-free rate of return, which is generally more beneficial to non-us markets. in particular, the current asset valuations of a-shares and hong kong stocks are outstandingly cost-effective globally, and their correlation with other overseas markets has decreased. funds may be allocated to a certain extent from a diversified perspective.

however, guotai fund pointed out that the fed's rate cut is a precautionary rate cut, and it is expected to have a greater impact on hong kong stocks than a shares. for a shares, the fed's rate cut is not the core factor. although the constraints on domestic monetary policy have been slightly relaxed, the core of the trend of a shares stabilizing still lies in the domestic fundamentals and the increase in counter-cyclical policies.

huaan fund also believes that the fed's interest rate cut is beneficial to the hong kong stock market's capital side, especially the domestic low interest rate environment and the us interest rate cut are beneficial to the hong kong stock dividend strategy. driven by the reform of central state-owned enterprises, central enterprises have strong dividend potential and willingness. with the current phased correction, the dividend yield of hong kong stock central enterprises has further increased, and the allocation value has become increasingly prominent.

china europe fund pointed out that for the domestic market, the fed's interest rate cut cycle has begun, which will help open up my country's monetary policy space. at present, the probability of the central bank's subsequent reserve requirement cuts and interest rate cuts is relatively high, which will form a marginal positive for the domestic bond market, but due to factors such as deposit diversion and bank net interest margins, the domestic interest rate cut space is still constrained. for the equity market, the fed's interest rate cuts and the return of us stocks to soft landing transactions are expected to accelerate the rebalancing between industries and drive the rise of risk premiums below the mean level. however, the current expectations for economic fundamentals have hardly changed, and the impact of fundamental factors on rebalancing transactions is weak, and the market will be more dominated by the capital side. in the medium and long term, against the background of a flat economy and no total stimulus policy, the domestic equity market is expected to continue to reflect a structural market.

several funds give asset allocation suggestions

when it comes to the allocation strategies of major asset classes, many fund companies have also given more specific investment advice.

li zhan suggested that investors with different risk preferences can refer to the following three investment directions:

first, the downward trend of us bonds is the most certain, and investors can give priority to investment opportunities in us bonds. among them, the downward range of short-term bond interest rates may be greater than that of medium- and long-term bond interest rates, so short-term bonds can be relatively overweighted.

second, conservative investors can consider gold with defensive industries, and then gradually increase the allocation of interest rate sensitive assets. on the one hand, gold will continue to benefit from the "two-way" drive of the downward trend of the real interest rate of us treasury bonds and the weakening of the us dollar index; in the "defensive industry", the domestic sector is mainly high dividend related sectors, and the overseas market mainly includes essential consumption, health care and utilities; on the other hand, considering that the extent of the current slowdown in the us economy is still unknown, once a "hard landing", even if the interest rate cut cycle begins, risky assets will also face a certain degree of adjustment. therefore, it is recommended to consider waiting for the first landing, and then gradually increase the allocation of interest rate sensitive assets.

third, active investors can consider gold as a base position while paying attention to growth and cyclical products. growth includes electronics, communications, new quality productivity and national defense; precious metals benefit from the fed's interest rate cut, while industrial metals benefit from the rising demand for commodities. in addition, growth sectors such as "innovative drugs" that are sensitive to us bond interest rates may benefit from the start of the interest rate cut cycle.

some fund companies also interpreted the investment opportunities in the interest rate cut cycle from the perspective of the stock and bond markets:

in the bond market, guotai fund said that after the fed confirmed the shift, it is highly likely that domestic monetary policy will be loosened, and the 10-year treasury bond will test the integer mark of 2%. however, when the 10-year treasury bond fell below 2.1% and approached 2%, the pressure of policy regulation increased objectively. the central bank continued to control the yield rate, and the big banks generally bought short bonds after selling long bonds. guotai fund believes that in the future, the central bank may not necessarily adopt a daily one-way purchase operation for short-term treasury bonds. the reversal of this policy may bring short-term adjustments and need to be closely watched. however, from this month to the end of the year, a large number of mlfs will expire every month, and short bonds may be mainly purchased within the year.

in terms of the stock market, morgan stanley fund predicts that as the us election becomes clearer and the fed cuts interest rates, overseas factors will gradually give way to domestic factors, policy expectations will gradually increase, and growth styles are expected to continue to have advantages in the short term. some growth areas such as tmt, high-end manufacturing, and innovative drugs are worth looking forward to. from a long-term perspective, going overseas and dividends are still the core directions that deserve special attention.

morgan funds said that against the backdrop of a soft landing of the economy, the federal reserve has started a cycle of interest rate cuts, which is beneficial to both the stock and bond markets. however, as there is still some uncertainty in economic and geopolitical risks, and there may be a gap between market expectations and actual policies, there may still be some volatility. investors should avoid the risk of excessive concentration and focus on improving the quality and diversification of their investment portfolios.