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View detailsThis week's minutes of the Federal Reserve added another fire to the expectation of interest rate cuts?
While the market is holding its breath for a signal from the Federal Reserve to cut interest rates, a key document - the minutes of the Federal Reserve's meeting - is quietly rewriting expectations. According to the Chui Feng Trading Desk, Citigroup's research report on July 7th shows that the minutes of the Federal Reserve's June 17-18 meeting, which are about to be released, will send a more dovish signal than expected, and the "observation period" for interest rate cuts may end at the end of summer. Although Powell maintained a neutral stance at the press conference following the June interest rate decision, several Fed officials subsequently sent out dovish signals, and the market has higher expectations for a rate cut in the upcoming meeting minutes. Recently, Michelle Bowman, a Federal Reserve governor with a hawkish stance, has turned to support the possibility of a rate cut in July. Governor Christopher Waller also indicated that he might support a rate cut in July. Meanwhile, data shows that as of June 2025, the year-on-year increase in the US core PCE price index, the Federal Reserve's favorite inflation indicator, has been below the 2% target threshold for three consecutive months. The continuous decline of this key indicator has become an important argument for the dovish forces within the Federal Reserve. Citigroup's research report shows that although the relatively strong employment data in the US last week blocked the possibility of a rate cut in July, the consensus among Federal Reserve officials on cooling inflation is driving the start of the rate cut process in September. The bank still believes that the Federal Reserve will start cutting interest rates from September and will have cumulatively reduced rates by 125 basis points by March next year. At the same time, it expects that the Fed's "wait-and-see period" may end by the end of summer. Powell seems to have always been more inclined towards cutting rates in September, suggesting that the interest rate path will depend on the data released in June, July and August. We expect the minutes of the meeting to include the view that the "wait-and-see" period may end by the end of summer - this is not a major surprise, but still somewhat dovish. The Wall Street Journal calendar shows that the minutes of the Federal Reserve's monetary policy meeting will be released early Thursday morning Beijing time. The cautious attitude in May needs to be changed Citigroup's research report shows that the minutes of the Federal Reserve's May FOMC meeting pointed out: When considering the outlook for monetary policy, the participants unanimously agreed that, given the continued stability of economic growth and the labor market, and the current moderately restrictive monetary policy, the committee is in a favorable position to wait for further clarification of the outlook for inflation and economic activity. Participants unanimously agreed that the uncertainty of the economic outlook has further increased, and thus it is appropriate to adopt a cautious attitude until the net economic impact of a series of policy changes by the US government becomes clearer. Now Citigroup believes that the uncertainty of the economic outlook has decreased, and the wording of the minutes of the May meeting will need to be adjusted. This paragraph may be modified as: The uncertainty of the outlook has decreased, and the committee expects to collect more data on the policy effects during the summer. This will strengthen the view that core members of the committee may support a rate cut in September. Another slightly dovish point is that at least "some" Fed officials support Chair Powell's view that the Fed should have started easing the policy rate towards a neutral level earlier if it weren't for concerns over the upcoming tariff inflation. In other words, the Federal Reserve could have cut interest rates earlier. Hawkish voices still exist but are not mainstream Although the overall tone tends to be dovish, the meeting minutes will also reflect the hawkish views of some officials. Cleveland Fed President Hammack and other officials suggest that the policy interest rate may remain at the current level for a relatively long time. Recently, Hammack stated that the current interest rate is only slightly restrictive and may remain stable for some time. The Federal Reserve is still "some distance away" from achieving its inflation target, and official data may not reflect the latest changes at present, including the recent rise in oil prices. However, Citigroup analysts expect that the minutes of the meeting will clearly show that this is not the basic situation for the committee, and "the majority" of Federal Reserve officials expect to lower the policy rate by the end of the year. This statement will further confirm the market's expectation of a rate cut in the second half of the year. Risk Warning and Disclaimer The market involves risks. Please invest with caution. This article does not constitute personal investment advice and has not taken into account the individual user's specific investment objectives, financial situation or needs. Users should consider whether any opinions, views or conclusions in this article are suitable for their specific circumstances. Any investment made based on this is at your own risk.
2025-07-08 -
View detailsIs the dollar still irreplaceable? Goldman Sachs: asset diversification pressure or price storm
When global investors begin to question the hegemony of the dollar, they may find that there are surprisingly few safe havens to choose from. Although the US dollar index fell by more than 10% this year, Goldman Sachs analysts warned that in the case of limited supply of a few alternative assets such as Swiss franc, precious metals and bitcoin, the diversification of US dollar exposure by institutions may trigger severe market volatility and drive the revaluation of nominal asset prices. On July 7, Mark Wilson, managing director and partner of Goldman Sachs, wrote in the research report that the rising risk of unsustainable global fiscal path is testing the resilience of the US dollar. However, because there are too few credible alternative currencies, diversification itself may become a catalyst for price fluctuations. Wilson believes that the main alternatives currently include only a few varieties such as Swiss franc, precious metals and bitcoin. This scarcity means that investors' decentralized allocation behavior will produce excessive price shock effect. Options other than dollars are limited. In Goldman Sachs' view, although global investors' demand for diversification of dollar assets has increased, there are limited alternative assets to choose from in reality. The market capacity of assets such as Swiss franc, precious metals and bitcoin is far less than that of the US dollar. If there is a large-scale inflow, the price will fluctuate "nonlinearly". The example of the Swiss franc highlights this problem. According to Wilson's survey, the continued strength of the Swiss franc has become a core issue of general concern to local investors, which has forced the Swiss National Bank to return to the zero interest rate policy (ZIRP). For global investors, the enlightenment of the Swiss case is that even the high-quality alternative currency faces the limit of its market carrying capacity. Goldman Sachs observed that the current fiscal reform process in the euro zone has temporarily stagnated. After the tariff resolution gradually landed on July 9, the market focus may return to the fundamental opportunities of the industry. Exchange rate fluctuations affect asset allocation. Goldman Sachs believes that if global investors diversify dollar assets on a large scale, it will not only affect the foreign exchange market, but also drive the repricing of nominal assets such as global stock markets. At the same time, US stocks hit a new high under the stimulus of multiple benefits, and institutional funds continued to flow into technology giants and AI sectors, indicating that the demand for US dollar assets remained strong. Goldman Sachs predicts that with the narrowing of spreads and global policy changes, the repricing and diversified allocation of dollar assets will become the focus of market attention. Goldman Sachs predicts that the Fed will cut interest rates three times in the next six months and twice again in the first half of 2026. Despite the weak performance of the US dollar in the first half of the year, compared with other central banks, the pace of the Fed's policy adjustment is still uncertain. As the spread gradually narrows, the US dollar exchange rate may face further adjustment, but in the absence of strong alternative assets, US dollar assets are still attractive. Risk warning and exemption clause The market is risky and investment needs to be cautious. This paper does not constitute personal investment advice, nor does it take into account the special investment objectives, financial situation or needs of individual users. Users should consider whether any opinions, viewpoints or conclusions in this article are in line with their specific situation. Invest accordingly at your own risk.
2025-07-07 -
View detailsThe underlying logic of Drip Capital: A "hybrid monster" of a red-chip structure and a quasi-ABS model
The IPO of Drip Irrigation Investment has ushered in a new era for the controversial Drip Irrigation Pass model. Since its establishment in 2021 to invest and form cash flow equity, to the opening of a financial asset exchange in Macao in 2023 to provide listing and securitization for its assets, and now to the IPO of Drip Capital Investment actively raising funds for the real economy, this financial adventure led by Li Xiaojia, the former president of the Hong Kong Stock Exchange, has been iterated time and again. One of the current focuses of Drip Capital is that the "corporate cash rights" it invests in belong to what kind of financial form and the applicable regulatory framework, which has yet to be determined. Under the Drip Capital model, it invests its own or the external funds it has leveraged in small and micro physical stores mainly in the chain format, and enjoys the right to cash flow income from the income or cash flow of the invested stores according to the agreed share ratio and term, also known as the "cash right". If we say that packaging the non-standardized cash flow income rights to the Macao Stock Exchange and then completing the public listing and transfer through securitization, it is a "non-standardized to standardized" transformation of cash right assets under contractual control. Then, the sequence of the upcoming IPO drip investment is completely opposite. That is, it first builds a standardized carrier (drip investment), and then uses the raised funds to invest in the cash flow income rights, which is a "standardized investment in non-standard". Protocol control +ABS Although the financial form to which it belongs is undetermined, the source of income from the underlying assets of Drip Capital is at least very clear - that is, the immediate cash flow of the invested enterprises. Compared with traditional stocks or fixed-income assets, the essence of Drip Capital is closer to asset securitization (ABS) investment that anchors expected cash flows. The difference lies in that conventional ABS is often accompanied by the actual off-balance sheet of the underlying assets and the construction of a special purpose vehicle (SPV) based on a trust relationship, thereby achieving risk isolation between the original rights holder as the financing party and the underlying assets as the investment target. Under such a framework, even if the original rights holder is exposed to risks or even goes into bankruptcy liquidation, the rights and interests of the ABS holder can still be isolated and protected. However, the "cash rights" of Drip Capital have certain particularities. It is difficult to achieve legal confirmation and isolation in the sense of physical or registration changes. Only through agreements or contracts can the rights and responsibilities of both the investor and the financier be clearly defined. Although Drip Capital established mechanisms such as SPV when it later packaged the "cash rights" to its affiliated Macau Financial Assets Exchange, the cash flow of the invested enterprises still found it difficult to survive independently of physical stores. In addition to the difficulty in achieving "off-balance sheet income rights", Drip Capital also has many differences from traditional ABS. On the one hand, the cash flow of ABS is linear and predictable. Underwriting institutions must disclose past income details to the public market, predict future cash flows and warn of risks. However, the cash flow of the store-type enterprises invested by Drip Capital/Drip Capital Investment often has more variables, and the cash flow fluctuations will also be greater. On the other hand, the underlying cash flow of ABS features exclusivity, long-term nature, and stability, often demonstrating a longer duration arrangement. However, the investment of Drip Capital will share the profits with the investee, and the proportion and period of the profit-sharing will be agreed upon in advance. To avoid the long-term business risks of the stores, the duration is often relatively short, and it tends to recover the principal earlier. In essence, it still belongs to a kind of investment that enjoys the right to income based on the agreement. This is quite similar to the red-chip model of Chinese concept stocks where the listed entity is overseas but the operating entity is within the country - the income rights securities of Drip Capital and the stocks invested by Drip Capital are both issued overseas, but the cash flow they invest in all comes from domestic enterprises. In fact, the practice of conducting ABS based on income rights as underlying assets has long existed in the domestic market. When the domestic enterprise ABS was first launched, many local financing platforms had already used the income rights of their infrastructure and public utility assets as the underlying assets to carry out ABS. At that time, the frequent establishment of income rights was not only related to the obstacles in the off-balance sheet operation of some underlying assets, but also to preserve the innovative achievements of ABS that had just emerged. To prevent defaults, many original rights holders provided rigid redemption measures such as "differential make-up commitment", which transformed this type of ABS into a kind of guaranteed bond. The difference of Drip Capital lies in that the principal income used to invest in cash rights is not guaranteed by the invested enterprise or store. Once a store experiences a cash flow interruption, Drip Capital needs to bear the corresponding internal risks. The "Involution Booster" and the "Scene ceiling" The above-mentioned risk characteristics may determine the limitations of Drip Capital's investment and financing scenarios - it must choose a business model where revenue is settled immediately or even in advance. Otherwise, if there is credit sales, it will face great uncertainty. For this reason, the current investment scenarios of Drip Capital are more prominently reflected in the chain consumption fields such as retail, catering, services, and culture and sports. The common feature of these business forms is that cash is king. The consumption income is converted into cash flow in the current period, and even can be credited in advance through prepayment (card recharge). The contradiction lies in that, specifically in terms of the industry cycle, the current situation is one where chain brands are vigorously expanding their stores, offline consumption competition is extremely fierce, and the supply of scenarios is significantly excessive. Chain coffee shops, tea beverages, restaurants or bulk snack stores have sprung up like mushrooms after rain. All the oligarchs are hoping to achieve economies of scale by expanding to tens of thousands of stores. During this process, Drip Capital's investment and support for franchisees and physical stores have clearly accelerated this progress. The consumption pattern does indeed have the feature of "cash first", but the more financial resources that Drip Capital has devoted to its franchisees and chain stores are likely to only exacerbate the oversupply and internal competition in the corresponding industries. The current impact on offline consumption is obvious to all. A set of statistics for the first half of 2024 shows that the total profit of large-scale catering enterprises in Beijing was only 180 million yuan, a year-on-year decrease of nearly 90%, with a profit margin as low as 0.37%. This is undoubtedly related to the weakness on the consumption side, but the fierce internal competition and price war brought about by the oversupply on the supply side should not be ignored either. In recent years, in the domestic securities market, the regulatory authorities have maintained a more cautious and wait-and-see attitude towards consumer enterprises with forms such as chain and franchise. The rapid expansion of related industries through stores not only easily accumulates external risks but also subjects themselves to the cyclical pain of short-term supply and demand imbalance. Facing relatively single applicable scenarios, Drip Capital is indeed actively expanding its investment types. For instance, in addition to business-based investment represented by store economies, this IPO of Drip Capital Investment has also added two potential investment directions, including "asset-based investment" that provides liquidity support for the investment shares of PE/VC institutions. And "corporate investment" that provides advance payment for scenarios such as office rent and salary payment for science and technology innovation companies. If "asset investment" is dedicated to providing liquidity support for S funds or investment share transactions, it is closer to a form of margin financing business. However, in the current primary market where the problem of "difficult exit" is still serious, its potential capacity may be slightly insufficient. "Enterprise investment" essentially targets the discount credit granting carried out in the large-scale payment scenarios required for the daily operation of science and technology innovation enterprises. Such business will obviously face fierce competition from domestic banks that are currently experiencing an "asset shortage". Taking all the above scenarios into consideration, Drip Capital and Drip Capital Investment may still face pressures such as overly limited scenarios, industry cycle risks, and market space. On the basis of full and prudent supervision, financial innovation often plays a positive role in revitalizing existing resources and stimulating economic development. From Drip Capital to stablecoins, today's Hong Kong market is becoming an "experimental sandbox" for many unprecedented financial paradigms in the country. However, whether Drip Capital can ultimately gain wide and long-term market recognition for cash rights investment as a financial form through stable risk control and adequate information disclosure, and what kind of domestic and international coordinated securities regulatory constraints it will face, remains to be verified by time. Risk Warning and Disclaimer The market involves risks. Please invest with caution. This article does not constitute personal investment advice and has not taken into account the individual user's specific investment objectives, financial situation or needs. Users should consider whether any opinions, views or conclusions in this article are suitable for their specific circumstances. Any investment made based on this is at your own risk.
2025-07-04 -
View detailsChampion hedge fund: the Fed will never cut interest rates this year.
Discovery Capital Management, the champion of the performance of US hedge funds last year, believes that the Federal Reserve is unlikely to cut interest rates this year, and at the same time, the US stock market is facing the risk of a short-term correction. On July 1st, Robert Citrone, the founder and portfolio manager of Discovery Capital Management, issued a warning on a media program that due to the market's expectations of the Federal Reserve cutting interest rates being seriously out of step with economic reality, coupled with the recurrence of trade frictions, the S&P 500 index may face a correction in the short term. However, he also predicted that the US economy would witness a "boom" next year, boosted by domestic investment and consumption, and that real investment opportunities might be emerging on the other side of the earth - in Latin America. Citrone made it clear that the two interest rate cuts widely expected within the year are "very dangerous", and he believes that the Federal Reserve is "absolutely impossible" to cut interest rates this year. He pointed out that the core inflation data remains stubborn and is expected to rise from the current 2.8% to 3.5% by the end of the year, which will make any reason for cutting interest rates untenable. This judgment stands in sharp contrast to the mainstream view in the market and also constitutes the core logic behind his bearish outlook on the short-term prospects of the US stock market. Citrone believes that this mismatch of expectations, coupled with the "difficult" trade negotiations with economies such as Europe and Japan, will bring turmoil to the market. He compared it to a "mini April", suggesting that the market would repeat the previous fluctuations. Despite a cautious short-term outlook, Citrone is extremely optimistic about the long-term prospects of the US economy. He believes that the current economic slowdown is merely an "illusion" caused by policy uncertainties and predicts that the United States will witness a "boom" next year, driven by both the return of manufacturing and consumption stimulus policies. Meanwhile, he pointed out that the appeal of US dollar assets is relatively declining, prompting global capital to turn its attention to overseas markets that offer better value for money. The market's expectation of interest rate cuts is too high, and the Federal Reserve is advancing or retreating to the trough Citrone believes that the biggest risk point in the current market lies in the misinterpretation of monetary policy. He said: The market is digesting more than two interest rate cuts, and I don't think there will be any rate cuts within the year. He explained that the key to supporting his "zero interest rate cut" judgment lies in the stickiness of inflation. Citrone pointed out that the $2.5 trillion injected by the United States into the economic system since the outbreak of the COVID-19 pandemic has not yet been fully recovered, which has led to persistently high inflation. Data from Discovery Capital Management shows that the core inflation rate will reach 3.5% by the end of the year. Against this backdrop, he believes that it is correct for Federal Reserve Chair Powell to stick to the current course and hopes that Trump will stop publicly criticizing the independence of the Federal Reserve. Citrone directly stated that the market's expectation that interest rates will be cut in April or May next year due to personnel changes is "very dangerous", and emphasized that the Federal Reserve needs to independently perform its duties. Short-term trade frictions are causing trouble, but in the long term, the US is optimistic about "prosperity". Apart from the poor monetary policy expectations, trade issues are another short-term disruptive factor that Citrone is concerned about. Citrone described the current tariff issue as "tricky" and "chaotic". Although he supports striving for fair trade through a tough stance, he also admitted that the process would not be "smooth sailing". He expects that these trade negotiations will continue to bring uncertainties to the market. However, from a longer-term perspective, Citrone believes that these tough trade policies are giving rise to positive structural changes. He observed that due to the impact of tariffs, some companies have begun to relocate their production lines back to the United States or expand their production capacity there. He quoted his communication with the managers of the industrial park as saying that their site had been completely rented out. Furthermore, he predicted that an important "big and beautiful" tax bill would greatly stimulate consumption among low-income groups. The bill will offer tax rebates to retirees and exempt tips and overtime income from taxes. Citrone added that these tax refunds will be credited to the accounts in March or April next year. Once people become aware of this, consumer spending will be activated. The dual drivers of investment and consumption have convinced him that "this country will witness a prosperity next year." The appeal of US dollar assets has declined, and Latin America has become a new value trough In Citrone's view, the flow of global capital is undergoing subtle changes. He believes that the 11% decline of the US dollar so far this year is not due to market expectations of interest rate cuts, but rather because overseas investors have started hedging after holding too many US dollar assets, and at the same time, American investors have also begun to turn their attention overseas. He used a vivid example to illustrate the misalignment of value: The market value fluctuation of Nvidia's stock price in a single day is equivalent to twice the market value of the entire Mexican stock market. He emphasized: There are so many opportunities outside the United States that I think investors will seize them. Citrone is particularly optimistic about Latin America. Compared with assets in the United States, the valuation of the Latin American market appears extremely low and is becoming a new value trough. He emphasized that investing in emerging market countries is like investing in a company, where "management is the key", and the "management" of a country refers to its policymakers. Argentina is his best case. The country has undergone a huge transformation from the "worst left-wing socialist policy" to the "gold standard economic policy". This fundamental policy shift has led to a "large-scale revaluation" of asset prices: the stock market has risen by 4,400%, and bond prices have doubled. He predicted that similar stories might be played out in other Latin American countries. In the next 15 months, important elections will be held in Peru, Colombia, Chile and Brazil. He predicts that the left-wing governments in these countries are likely to be replaced by the center-right ones. However, he is cautious about Brazil because the current president Lula still has a chance to win and may implement a large number of "populist policies" during this period. Therefore, his strategy is to increase his position when the Brazilian market corrects, while he has already made plans in countries like Argentina and Peru. Risk Warning and Disclaimer The market involves risks. Please invest with caution. This article does not constitute personal investment advice and has not taken into account the individual user's specific investment objectives, financial situation or needs. Users should consider whether any opinions, views or conclusions in this article are suitable for their specific circumstances. Any investment made based on this is at your own risk.
2025-07-03 -
View detailsAfter the "stress test" passed, Wall Street banks opened a feast of dividends and repurchase.
After passing the Federal Reserve's annual stress test, large American banks announced that they would raise their dividends in the third quarter and start new stock repurchase plans. On Tuesday, six major banks, including JPMorgan Chase, Bank of America and Wells Fargo, issued announcements one after another to raise the dividend distribution level. Among them, JPMorgan Chase raised its quarterly dividend from $1.40 to $1.50 per share, and launched a new share repurchase program of $50 billion. The results of stress tests released by the Federal Reserve last week showed that major banks could still maintain adequate capital levels under extreme scenarios such as severe economic recession, soaring unemployment rate and market turmoil. The ratio of Tier 1 common equity of the six major banks has remained at the double-digit level, far exceeding the regulatory requirements. These measures reflect the steady performance of the banking industry in the current economic environment, and will also bring more generous returns to shareholders. The Federal Reserve is reforming the stress testing mechanism, and plans to adopt the method of two-year average results to reduce the volatility of test results. Major banks have raised dividends one after another. As the largest bank in the United States, JPMorgan Chase raised its dividend by 7.1%, which is the second time this year. Jamie Dimon, CEO, said that the decision of the board of directors to raise the dividend represented a sustainable level of capital allocation and was supported by strong financial performance. Bank of America raised its dividend by 8% to 28 cents per share, Wells Fargo raised it from 40 cents to 45 cents, Morgan Stanley approved a new share repurchase plan of 20 billion dollars, and plans to raise its quarterly dividend to 1 dollar per share. Goldman Sachs' dividend rose the most significantly, from $3 to $4, while Citigroup raised it from 56 cents to 60 cents. These measures were announced immediately after the banks passed the stress test, showing the management's confidence in the bank's capital strength. Stress test results exceeded regulatory expectations. The stress test results of the Federal Reserve showed that banks maintained an average Tier 1 common equity ratio of 11.6%, far higher than the minimum standard of 4.5% required by regulators. The six major banks all maintained double-digit capital ratios under the test scenario. The test scenarios include extreme situations such as severe economic recession, sharp rise in unemployment rate and violent fluctuations in financial markets. The banking industry can still maintain sufficient capital buffer under these stress scenarios, which proves its ability to resist risks. Dimon said in a statement that the stress test results show that the banking industry is resilient. The new stock repurchase program provides banks with the ability to distribute capital to shareholders at an appropriate time. Fed brewing test mechanism reform The Federal Reserve is carrying out a comprehensive reform on the implementation of stress tests. In April this year, the regulator proposed that the future test results should adopt a two-year average to reduce the volatility of the results. David Solomon, CEO of Goldman Sachs, said that the Fed has expressed its intention to adopt a more transparent and fair approach to these tests, aiming at maintaining the security and robustness of the financial system. The Federal Reserve said on Friday that if the test results in 2025 and 2024 are averaged, banks may need to set aside more capital to meet regulatory requirements. This rule-making project is still in progress, which may have an impact on the capital planning of banks in the future. Risk warning and exemption clause The market is risky and investment needs to be cautious. This paper does not constitute personal investment advice, nor does it take into account the special investment objectives, financial situation or needs of individual users. Users should consider whether any opinions, viewpoints or conclusions in this article are in line with their specific situation. Invest accordingly at your own risk.
2025-07-02 -
View detailsThe record-high US stocks are testing investors' faith in European stocks.
Recently, Wall Street has rebounded strongly from tariff turmoil and hit a new high, significantly narrowing the gap with European stock markets. The S&P 500 index soared by 10% in the second quarter, far outpacing the less than 2% gain of the European Stoxx 600 index and outperforming other major global indices. The outstanding performance of the US stock market has taken the market by surprise. Previously, investors generally expected that Trump's tariff policy would lead to a continuous flow of funds to other markets, especially the European market. In early 2025, the European stock market performed well, driven by expectations of increased spending on defense and infrastructure. The rebound in US stocks has weakened investors' confidence in the sustainability of the European pivot strategy, although European stocks have still slightly outperformed US stocks overall this year. Although the European stock market as a whole still outperformed the US market in 2025 - the Stoxx Europe 600 index rose by 7% this year, while the S&P 500 index increased by 5% - the recent poor performance in Europe has intensified investors' concerns that the region may fail to maintain the momentum created by Germany's "whatever it takes" defense and infrastructure spending plan. The issue in Europe has always been profit, profit, profit. You can question the valuation of US stocks, but these stocks are backed by solid balance sheets. Trading in Europe is more speculative and depends on whether countries like Germany will truly implement infrastructure plans. U.S. stocks are supported by multiple factors. Nvidia, a major driver of the AI wave, hit a record high last week. Among the stocks that saw significant gains in the second quarter were data intelligence firm Palantir, where Peter Thiel serves as chairman, which rose by more than 50%, and cryptocurrency exchange Coinbase, whose share price doubled as investors flocked to crypto stocks. Disagreements still exist. Goldman Sachs analysts said in a research report last week: Luca Paolini, chief strategist at Pictet Asset Management, believes that: Risk Warning and Disclaimer Clause
2025-06-30 -
View detailsMost don't support interest rate cuts in July! Senior Fed officials spoke for the first time after the "silent period"
On Thursday, several Federal Reserve officials spoke, making it clear that it would take a few more months to confirm that the price hikes triggered by tariffs would not push up inflation in a sustained way. They are not ready to support a rate cut at the next meeting. Recently, the speeches of two Federal Reserve governors appointed by Trump during his first term as the president of the United States, Waller and Bowman, have drawn attention. They all indicated that if inflation remained under control, they would be willing to start cutting interest rates at the Federal Reserve's meeting on July 29-30. However, since then, about ten Federal Reserve policymakers, including Federal Reserve Chair Powell, New York Fed President Williams and San Francisco Fed President Daly, have all poured cold water on this view. Several officials said they could wait a little longer Daley admitted in an interview with the media on Thursday that more and more evidence suggests that tariffs may not trigger a large-scale or sustained increase in inflation. But this only made her open to interest rate cuts in the autumn. Daley said, "My main expectation has always been that we will start adjusting interest rates in the autumn, and this view has not changed." Since the beginning of this year, the growth rate of prices has been lower than expected. The inflation indicator preferred by the Federal Reserve rose by 2.1% year-on-year in April, slightly higher than the 2% target. Data released earlier on Thursday also showed that the number of people continuously filing for unemployment benefits rose to the highest level since November 2021, with a significant increase over the past six weeks, indicating that more people have been unable to re-enter employment for a long time. Meanwhile, the number of initial jobless claims for the week ending June 21 declined. Daley said that although the labor market has slowed down, she has not yet seen any warning signs of its obvious weakening. She reaffirmed that the current monetary policy "is in a good position". On Thursday, Susan Collins, president of the Boston Fed, said in an interview with the media: "Before the July meeting, we will only see one month's data. I hope to see more information." Collins said her basic expectation was to start cutting interest rates later this year. This might mean one interest rate cut or more than one, but I think we need to judge based on the data. I don't see the urgency of cutting interest rates. On the same day, Richmond Fed President Barkin pointed out that he expected tariffs to exert upward pressure on prices. With uncertainty still high, the Federal Reserve should wait for more clear signals before adjusting interest rates. Barkin said, "Against the backdrop of the current strong economy, we have time to observe patiently and wait for a clearer outlook." Also on Thursday, dovish Chicago Fed President Goulsby said that if inflation clearly falls towards the 2% target and economic outlook uncertainties decrease, the Federal Reserve can resume cutting interest rates. I'm optimistic about the current data. Maybe the impact of tariffs will only be limited to what it should be, but we need to confirm. Federal Reserve Chair Powell said at a congressional hearing on Tuesday that if it weren't for the future price uncertainty brought about by tariffs, the Fed should have started cutting interest rates based on the decline in inflation. Before this, there is no need to rush to change the interest rate policy: The impact of tariffs will depend on various factors such as their final level. At present, we have sufficient space to observe the economic trend and then consider whether to adjust the policy stance. Risk Warning and Disclaimer The market is risky. Investment should be made with caution. This article does not constitute personal investment advice and has not taken into account the individual user's specific investment objectives, financial situation or needs. Users should consider whether any opinions, views or conclusions in this article are suitable for their specific circumstances. Investment based on this is at your own risk.
2025-06-27 -
View detailsNew chairman, big easing? The market's expectations for the Fed next year are very radical.
Deutsche Bank's latest research report shows that the market's expectations for the Fed next year have changed significantly, and it is expected that the new chairman may promote continued easing. On June 26, according to the news of the wind-chasing trading desk, Deutsche Bank said in its latest research report that the financial market's policy expectations for the Fed next year have changed significantly, especially the expectation of interest rate cuts after the new Fed chairman took office. The term of the current chairman of the Federal Reserve will expire in May next year. However, according to an article on Wall Street, Trump is considering announcing the next chairman of the Federal Reserve as early as this summer, much earlier than the traditional transition period of 3-4 months. According to informed sources, Trump hopes that by announcing his successor in advance, the "shadow chairman" will begin to influence market expectations and the direction of monetary policy before Powell's term ends. The report also said that since Federal Reserve Governor Waller and other officials made dovish speeches last week, the market has cut interest rates by about 10 basis points at the end of the year. Statistical model reveals abnormal pricing next year: the phenomenon of "new chairman premium" emerges Deutsche Bank said that the really striking change occurred in the expectation of interest rate cuts in the middle of next year. According to the report, the market seems to be increasingly expecting that monetary policy will continue to be loose once the new chairman of the Federal Reserve takes office. The term of office of the current chairman Powell will expire in May next year, and this time node has become the focus of market attention. Deutsche Bank found a striking phenomenon through the regression model: it regressed the interest rate cut pricing in the second, third and fourth quarters of next year to the first quarter, and measured the "abnormal" degree of forward interest rate cut expectations relative to the first quarter through residual analysis. Deutsche Bank found that these residuals turned negative significantly in the past month, especially in the third quarter of 2026-during the new chairman's tenure. This shows that the market is pricing the unusually loose policy during the new chairman's term, which deviates from the historical norm in recent years. Note: Residual refers to the difference between the actual observed value and the estimated value (fitting value). "Residual" contains important information about the basic assumptions of the model. If the regression model is correct, the residual can be regarded as the observation value of error. However, the report also pointed out that we are cautious about this "new chairman premium". Because the formulation of monetary policy needs the support of FOMC's majority voting committee, the new chairman of the Federal Reserve needs to convince his colleagues to support different policy trajectories. This institutional constraint means that the policy pricing discontinuity around the new chairman should be slight. It is worth noting that even with the above differences, the market's expectation of interest rate cuts in the second, third and fourth quarters of 2026 is still less than that in the first quarter, which shows that the market does not expect a sharp shift in policy, but believes that the easing policy under the new chairman will last longer. Recent changes in market pricing: Dove remarks push interest rate cut expectations. According to the previous article on Wall Street, on Monday (June 23), when talking about economic and monetary policies, Federal Reserve Governor Bowman said that if inflationary pressure is kept under control, it will support the interest rate cut as early as July. Bowman's reason is that risks in the labor market may rise, and inflation seems to be steadily moving towards the Fed's 2% target. Last Friday, Federal Reserve Governor Waller said in an interview with CNBC that he might support a rate cut next month because he was worried that the labor market was too weak. Deutsche Bank pointed out in the report that since last Thursday, the market has set an additional price of about 10 basis points for the Fed to cut interest rates before the end of the year, which is mainly influenced by the dovish remarks of Federal Reserve governors Waller and Bowman. This change reflects the immediate reaction of investors to the softening of the Fed's policy stance. According to the latest data of FedWatch, the probability of the market betting on the Fed to cut interest rates in July is 20.7%, which is higher than that of a week ago (12.5%). At present, traders have fully included the expectation of interest rate cuts at the September meeting. Risk warning and exemption clause The market is risky and investment needs to be cautious. This paper does not constitute personal investment advice, nor does it take into account the special investment objectives, financial situation or needs of individual users. Users should consider whether any opinions, viewpoints or conclusions in this article are in line with their specific situation. Invest accordingly at your own risk.
2025-06-26 -
View detailsMu Yuan explains the listing plan of Hong Kong stocks: entering the international market is more important than financing.
The "A+H" listing plan of leading pig farming company Muyuan Food (002714.SZ) is steadily advancing. Three weeks after submitting the prospectus, the application materials for the listing filing of H shares issued by Muyuan Food Co., Ltd. were accepted by the China Securities Regulatory Commission. On June 22nd, the day of Muyuan Food's "Pig Farming Festival", Yuan Hebin, the company's secretary of the board and chief legal officer, Qin Jun, the secretary of the board, and other senior executives had an exchange with Wall Street Journal · Xin Feng on issues such as listing on the Hong Kong Stock Exchange, internationalization strategy, and breeding costs. Qin Jun stated that the IPO on the Hong Kong Stock Exchange is not only a financing measure but also a key node in Muyuan's internationalization strategy. It is an important step for Muyuan to carry out overseas business and implement its internationalization strategy in the next five to ten years. For today's Muyuan, completing its Hong Kong stock issuance and entering the international capital market is far more important than raising a certain amount of money. Qin Jun said. "Technology going Global" Muyuan Food's global business starts from Southeast Asia, with equipment and technology output as the main path. Currently, Muyuan Food has established a subsidiary in Vietnam. In 2024, it reached a strategic cooperation with the local pig farming enterprise BAF, providing pig farming technical service solutions, hardware support, personnel training, etc. Southeast Asian countries represented by Vietnam are currently experiencing a large-scale African swine epidemic. The price of pork in Vietnam has been extremely high since the second half of last year, equivalent to the most severe years of African swine fever in the country. Qin Jun said, "The population density, population structure and relatively high economic growth rate in Southeast Asia are all very favorable external environments for the pig farming industry." Muyuan believes that the Southeast Asian market has a lot of room for development in terms of investment in equipment and research and development, as well as the ability to prevent and control African swine fever. Muyuan hopes that the technical capabilities, management level and intelligent equipment accumulated over the years can play a role in its overseas expansion process. Over the past two years, we have been sharing technologies and intelligent equipment with the industry in China. For instance, we have provided equipment installation services for many pig farms and chicken farms in the country by exporting our entire deodorization and sterilization processes and equipment. The logic of sharing technologies and equipment in domestic and foreign markets is actually the same. Qin Jun said. However, the revenue from intelligent equipment does not carry a high weight in the current landscape, and the specific situation has not been disclosed yet. How to improve quality and efficiency The operational focus of domestic business is on improving quality and efficiency as well as increasing profits. In 2025, Muyuan Food Co., Ltd. aims for an average annual breeding cost of 12 yuan per kilogram. Since the beginning of the year, the cost has indeed decreased month by month. In May, it dropped to around 12.2 yuan /kg, and the proportion of production lines with a cost below 11.5 yuan /kg has reached 11.5%. However, there is still a gap compared with the international advanced level. The main reason lies in the inherent endowment of a healthy environment. Abroad, the PSY (Pigs Weaned per Sow per Year, the number of Weaned piglets provided by a sow in one year) is 34, but the domestic average is 21-22 and Muyuan's current level is around 28. Muyuan Food Co., Ltd. stated. In the future, Muyuan will continue to reduce costs and increase efficiency in areas such as health management, pig breeding, nutritional formulas, and intelligent applications. In the view of the Qin army, the "10-yuan era" might not be far off. Muyuan also hopes to enhance product quality through the integrated management of its breeding and slaughtering businesses, maximize the value of a single pig, and pursue the space for value gain. Continuously optimizing the financial structure is also one of the goals. By the end of the first quarter of 2025, the capital debt ratio of Muyuan Food Co., Ltd. reached 59.2%, a slight increase compared to the end of last year. Muyuan stated that the first quarter is the peak payment period for the industry and maintains the goal of reducing debt by 10 billion yuan for the whole year unchanged. In response to the issue of a relatively high proportion of short-term debt, Qin Jun said, "The assets of pig breeding enterprises mainly consist of pigs and pigsties." As a live asset, it is difficult to determine the ownership of live pigs. Pig houses are mainly built on leased collective land, and financial institutions generally regard them as non-effective collateral, resulting in a high proportion of short-term loans. In 2024, Muyuan Food Co., Ltd. witnessed for the first time that its annual capital expenditure was less than the depreciation of assets. The company stated that future capital expenditures will show a gradual downward trend and the long-term debt ratio target will be reduced to over 40%. Risk Warning and Disclaimer The market is risky. Investment should be made with caution. This article does not constitute personal investment advice and has not taken into account the individual user's specific investment objectives, financial situation or needs. Users should consider whether any opinions, views or conclusions in this article are suitable for their specific circumstances. Investment based on this is at your own risk.
2025-06-25 -
View detailsBanu's Impact on IPO of Hong Kong Stock Market: Can
The army rushing to list on the Hong Kong Stock Exchange has finally seen the presence of a hot pot enterprise. Following Haidilao (6862.HK) and Xiba Xiba (0520.HK), Banu, the third-largest hot pot brand in China, recently submitted its prospectus to the Hong Kong Stock Exchange. In 2024, Banu ranked behind Haidilao and Xabu Xabu brands with a market share of 0.4%. However, in the high-end hot pot chain market, Banu can be said to stand out alone. In the quality hot pot market where the per capita consumption exceeds 120 yuan, it ranks first with a market share of 3.1%. Among the top five chain quality hot pot restaurants with an average transaction value of over 120 yuan, Banu is the only brand that has maintained positive growth. However, against the backdrop of price cuts in the catering industry, the fierce competition in the hot pot market, and the rise of the franchise model, Banu still faces severe growth challenges. How long can the story of "productism" be told? High Prices and "Productism" Banu, a high-end hot pot brand, did not originate in Beijing, Shanghai, Guangzhou or Shenzhen, but was born in Anyang, a small fourth-tier city in Henan Province. In 2009, Banu first entered Zhengzhou, the capital of Henan Province, and began to compete head-on with Haidilao. Founder Du Zhongbing commented, "I have been working for three years and learning for three years. I was determined to surpass Haidilao, but I haven't even touched the edge." Three years later, Banu first shouted out the slogan, "Service is not Banu's specialty; beef tongue and mushroom soup are." It took "productism" as the core of its establishment. The signature beef tongue product has abandoned the traditional caustic soda soaking process and innovatively adopted the "papain tenderization technology", which offers a better taste and is healthier. It has quickly established a differentiation in the Sichuan-Chongqing hot pot market. Tomato Capital, the largest external investment institution, injected capital into Banu twice between 2020 and 2022, with a total investment of 273 million yuan. External investment helped Banu get through the low point of the catering industry. In 2024, Banu's revenue reached 2.307 billion yuan, with a compound annual growth rate of 26.9% over the past three years. In the current era when cost-effectiveness is widely emphasized in the catering industry, choosing to operate a high-priced hot pot business is a challenge. The incident where only five slices of selenium-enriched potatoes cost 18 yuan and the founder's statement that "don't eat hot pot with a monthly salary of 5,000 yuan" have both embroiled Banu in a public opinion storm. In 2024, the per capita consumption of Banu customers dropped from 150 yuan in the previous year to 142 yuan. The comparable table turnover rate of the same store dropped from 3.2 times to 3.1 times, and the overall decline in same-store sales reached 11.9%. Banu, which is striving to strike a balance between high-end positioning and market share, hopes to attract back customers through gentle price cuts. For instance, the pot base was changed from the traditional single-pot form to a three-grid self-selection mode, and the average price of the pot base was lowered by charging by grid. The "Vegetables New Every Month" plan was launched, adding pork and vegetable products to the main product portfolio of beef and beef, achieving structural price reduction. Starting from the second half of 2024, Banu has successively launched a "24-hour operation" model in 120 stores, attracting customers with the selling point of "midnight diner". The strategy of "trading price for volume" has to some extent curbed the downward trend of store performance. In the first quarter, the passenger flow at Banu soared by 40% year-on-year to 5.41 million, and the table turnover rate rose sharply from 3 times in the same period of 2024 to 3.7 times. Against the backdrop of an overall year-on-year decline of 10 yuan in average transaction value, the growth rate of same-store sales turned positive to 2.1%. However, in second-tier, third-tier and lower-tier cities where per capita consumption is already lower, the stimulating effect of "midnight diner" is greatly reduced, with the same-store sales growth rate being only 0.4% or 0.3%. The contradiction between unit price and profit Banu once stated that it hopes to expand the category of hot pot dining into business banquets and high-end customer groups, breaking down the barriers between business banquets and hot pot. However, the company's operational comfort zone is not in the first-tier cities where business activities are more concentrated. In the first quarter, Banu's average transaction value in first-tier cities was 159 yuan, which was 21 yuan higher than the average level. The operating profit margin was 20.7%, which was 3 percentage points lower than the average. In the fields of business banquets and high-end catering, first-tier cities often imply more intense market competition, as well as higher rent and labor costs. In second-tier and lower-tier cities where the proportion of stores is nearly 80%, Banu's store foot traffic is even higher, and its operating profit margin has reached 24.5%. But at least for now, Banu's high average transaction value has not brought about the corresponding high profits. In 2024, the average transaction value of Banu reached 138 yuan, which was 45% higher than that of Haidilao. However, the adjusted net profit margin was 8.5%, which was 6.1 percentage points lower than the core operating profit margin of Haidilao during the same period. Another factor affecting profits lies in the fixed costs related to the supply chain. Banu is the only company among the top five hot pot chain brands that has all the dishes in its stores centrally supplied by a central kitchen. To ensure the quality of ingredients and the stability of supply, Banu builds a central kitchen every time it opens a new store in a new area. Through five central kitchens, it covers all stores across the country and delivers on a daily basis. It emphasizes "If it can be chilled fresh, do not freeze it; if it can be natural, do not use additives; if it can be done on the same day, do not leave it overnight." From 2022 to 2024, Banu's depreciation and amortization of other assets were approximately 100 million yuan, accounting for 7.8%, 5.1%, and 4.5% of its revenue respectively. Although the investment in the supply chain is high, the current production capacity is not high. The capacity utilization rate of central kitchens in North China and South China is only 22% and 28% respectively. In the Central China region, where stores are most concentrated, the capacity utilization rate is only 60%. In tandem with the development of the supply chain is the expansion of stores. Banu plans to build satellite warehouses in Henan, Shaanxi, Hubei, Anhui, Zhejiang and Jiangsu provinces. The supply radius will be further extended on the basis of the original 600 kilometers to support the expansion of stores to surrounding cities. The increase in purchase volume driven by store expansion and the scale effect may become the ultimate weapon for optimizing the operational efficiency of the supply chain and even the expense ratio. However, in the face of the current trend of pressure on the average transaction value in the catering industry, Banu has chosen to focus on the "employment level" to reduce costs and increase efficiency. In 2024, although Banu saw a net increase of 131 regular employees, the number of part-time employees rose significantly by 1,553, a 1.4 times increase. In the first quarter, the proportion of employee costs at Banu continued to rise, increasing by 0.6 percentage points to 34.2%. The heel of direct operation Whether from the perspective of improving quality and efficiency or the urgency of seizing the market, scale is of vital importance to Banu's development at the current stage. The fundraising in the Hong Kong stock market is expected to serve as a booster for Banu's new round of store growth. From 2025 to 2027, the company plans to open approximately 40, 50 and 60 directly-operated stores respectively, which means doubling the number of existing stores within three years. The opponent's land-grabbing campaign also began at the same time. The two leading hot pot enterprises, Haidilao and Xiba Xiba, which used to mainly adopt a direct operation model, have also shown a positive attitude towards franchise. Haidilao announced the launch of franchise services in March last year, cooperating with institutional investors or those with business experience. So far, 13 franchise stores have been established. He Guangqi, the founder of Xiba Xiba, also revealed that the company might adjust the pace of opening stores and launch franchise services by 2025 at the latest. Du Zhongbing believes that whether a business model is suitable for franchise depends on the degree of reliance on people. Fast food relies on products and has a very mature process. As long as the supply chain is well established and the materials are delivered in place, the franchise model is feasible. Du Zhongbing said. Even though hot pot is the most standardized category in Chinese cuisine, in Du Zhongbing's view, it still fails to meet the standards. "Banu's products are all personalized, and standardization is difficult. It's even more challenging to do franchise business." " Du Zhongbing said. In fact, Haidilao's franchise adopts a "strong management" model. That is, Haidilao is fully responsible for the daily operation of the franchise stores, including store operation, performance assessment, personnel recruitment, member management, supply chain, etc. Franchisees often act as "hands-off managers". Banu may not have reached the stage of opening up franchises either. The reason might be that the brand and its bargaining power have been consolidated. At present, it has only entered 14 provinces and municipalities directly under the Central Government. In many provinces including Yunnan and Shaanxi, there are no more than 10 stores, and it has not established sufficient brand influence. In the lower-tier markets of third-tier and lower-tier cities, Banu's bargaining power is even weaker. The average transaction value can be up to 40 yuan lower than that in first-tier cities, while the price difference of Haidilao during the same period is approximately 13 yuan. The current insistence on direct operation essentially still serves the narrative of "productism". However, in terms of management radius, risk resistance capacity and flexibility, opening direct-operated stores not only has an expansion ceiling, but also the pace of store expansion will not be too fast. In the first quarter of this year, Banu opened three new stores while closing three others, and the total number of its stores remained stagnant. The hot pot industry has passed the golden period of expansion with an increase in the rate of chain operation. As a leading player, Haidilao has been exploring new growth opportunities through various means in the past two years. In 2023, Haidilao implemented a regional system reform and decentralized decision-making power, strengthening the regional attributes of its dishes. The following year, the "Red Pomegranate Plan" was vigorously promoted, and the sub-brand was incubated through internal entrepreneurship. Recently, it has even launched a 22-yuan buffet lunch, aiming to seek new growth on the basis of traditional store business. Banu has not been without attempts at diversification and personalization. However, its previous attempts in the seafood category and the sub-brand "Chao Dao" that focuses on affordable hot pot have both failed. In 2024, Banu's revenue growth rate significantly slowed from 47% in the same period of the previous year to 9%, and its cash flow from operating activities declined by 7.7%. If the expansion process falls short of expectations, Banu may have to tell a new story beyond the expensive "productism". Risk Warning and Disclaimer The market is risky. Investment should be made with caution. This article does not constitute personal investment advice and has not taken into account the individual user's specific investment objectives, financial situation or needs. Users should consider whether any opinions, views or conclusions in this article are suitable for their specific circumstances. Investment based on this is at your own risk.
2025-06-24