FXTM: New Year and new weather, global hot money is flooding into a country

From the end of 2022, "Learning Now and Using Now" has made a minimalist version of the New Year's Eve review and outlook, taking a new approach to see what happened in 2022 and how 2023 will play out. inFXT（fxtmIt is launched every Friday.

We have separately interpreted the major issues that the market is concerned about, including: the results of the Federal Reserve's interest rate hike, the performance of financial assets after the conflict between Russia and Ukraine, the income ratio of long-term funds in 2022, the root causes of inflation, the specific income of international capital, and the increase in global central banks' holdings of gold.This is the last installment of our content this season, which has great guiding significance for the investment layout in 2023.

Part.1

Money goes to "earn"

In 2022, the global opportunity to "earn" is in the United States. Interest rate hikes have rapidly increased dollar yields, and global hot money funds have flowed to the United States to earn higher yields.

Where are the opportunities for global "making" in 2023?

In China, and the money is already moving.

China has a clear advantage in economic growth in 2023, and it is likely to be the locomotive of world economic growth, which allows China to have more opportunities to "earn". The following is the World Bank's forecast for the economic growth of major global economies in 2023:

The World Bank forecasts that China's economy will grow by 4.3% in 2023. Although this is already much higher than other economies, it may still be conservative. Most institutions currently predict that China will achieve an economic growth rate of 5% or more in 2023. Most provinces and cities have already held two sessions in January this year, and most provinces and cities have given economic growth targets of 6% and 7%. At the two sessions later this year, the central government will officially give GDP growth targets.

Under the call of "making money", global hot money funds are in action, and there are already preliminary signs of flowing to China.

Part.2

Both rise

Hot money is the smartest money, and it is already entering China from the data point of view, and has caused both class A shares and the RMB to record a surge.On the disk in January, class A shares and the RMB both rose sharply. There are two important products on the FXTM platform, the A50 index (CHNA50-m) and the US dollar/offshore RMB (USDCNH). Comparing the two charts, we can see that there are two common important time nodes, 2022.11.1, the RMB starts to rise, and the A50 index bottoms out and starts to rise; 2022.12.29, the RMB accelerates after the shock, and the A50 index accelerates after the shock. (As shown in the figure below)

(▲ USDCNH D1 source: FXTM MT4 platform)

(▲ CHNA50 D1 source: FXTM MT4 platform)

Renminbi, class A share both recorded gains and northbound capital movements are also corresponding. This round of northbound capital increase began in November 2022. The data shows that in November and December 2022, the net inflow of northbound funds was 60.095 billion yuan and 35.013 billion yuan respectively. The data for January 2023 is at the deadline and is accelerating the inflow. (As shown below) In the past 13 trading days in 2023, the cumulative inflow of northbound funds reached 103.275 billion yuan, exceeding the cumulative net inflow in 2022.

Northbound funds refer to funds that buy Shenzhen and Shanghai stocks from Hong Kong northward. They are also known as hot money and smart funds. Northbound funds have the advantage of being more prescient than mainland funds in the stock market. Because northbound funds have wider information channels than mainland funds, they have a relatively high sense of smell in the market. From the perspective of capital flow, northbound funds are concentrated in non-bank finance, power equipment, and food and beverage industries.

Part.3

"Seesaw" relationship

The economic growth of China and the United States has a seesaw relationship in 2023. If China's economic growth rate is high, it represents the release of China's economy and consumption, supporting the strengthening of commodities. A stronger commodity will inevitably push up US inflation.

If inflation in the United States goes up, the Federal Reserve has to be more hawkish in raising interest rates to fight inflation, which is not good for the US economy and the stock market. It can be seen that in 2023, as high as China's economic growth can rise, so will commodities; how high the inflationary pressure in the United States will be, and how low the US economic growth will be suppressed.

From the perspective of inflation, it can also be understood that several countries have recently introduced various restrictions on Chinese tourists. When Chinese tourists go abroad to buy and buy, it will be difficult for their inflation to go back, and there is a possibility of long-term inflation. For example, in the United States, the economic growth in 2023 is only 0.5%. If inflation cannot be controlled, it will be an unfavorable situation of "low growth and high inflation".

China's economy is expected to thrive globally and attract capital in 2023.But also pay attention to whether someone will stumble, interrupt your advantage, and intercept the flow of funds, which is the potential risk and variable of class A shares and RMB in 2023.

Finally, on the occasion of bidding farewell to the old and welcoming the new, I wish all friends a happy new year and a prosperous new year!

Disclaimer: This written/video material is personal opinions and ideas and should not be construed as containing investment advice of any kind and/or an invitation to trade of any kind. It does not imply an obligation to purchase investment services and does not guarantee or predict future performance. FXTM and its network affiliates, agencies, directors, officers or staff do not guarantee the accuracy, validity, timeliness or completeness of any information or data and accept no responsibility for losses resulting from investments made based on the above information.

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