Hong Hao: Capital beginning to flow back to China is a high probability event, gold will continue to hit new highs

According to the financial news app Zhitong Finance, recently, the chief economist of CICC, Hong Hao, stated that the entire return expectations and capital flows are likely to change now, so funds may start flowing back, with at least four to five trillion US dollars flowing back to the Chinese market overseas, which will greatly drive the appreciation of the RMB. He believes that gold will continue to hit new highs. This is mainly because if the Fed cuts interest rates, the holding cost of gold will decrease, as holding gold does not earn interest, while holding US Treasury bonds does.

Hong Hao pointed out that the appreciation of the RMB is good for Hong Kong stocks, as Hong Kong stocks are RMB assets priced in US dollars. In this wave of market trends, Hong Kong stocks have performed slightly better than A-shares. Due to low valuations and changes in RMB expectations, tech stocks have rebounded more strongly. The real estate sector has also been boosted by rumors of mortgage policy changes. In fact, some large bank stocks in A-shares still show a clear triple top technical pattern. Therefore, the combination of technical and fundamental news has led to profit-taking in the banking sector. After all, this banking sector has already risen so much.

Hong Hao believes that investors should not be too pessimistic about A-shares. The market breadth has actually improved rather than worsened. If the breadth expands and small and medium-sized caps as well as the ChiNext board can rise a bit, although the overall index may not look so good, he believes that for the majority of investors, the probability of making money by buying stocks is increasing, as the proportion of rising stocks is increasing, the winning side is expanding, not shrinking.

Regarding gold, the previous investment logic for gold was mainly triggered by the lack of purchasing power of sovereign currencies and the distrust of the existing US dollar credit system. Now, while the logic of sovereign debt and purchasing power still exists, the opportunity cost is decreasing. Therefore, Hong Hao believes that gold will continue to hit new highs.

Hong Hao stated that global volatility is increasing, so in fact, safe assets are lacking. Or it can be said that the supply of safe assets is far less than the demand for them, not only for US Treasury bonds. Therefore, Chinese government bonds have the potential to become a global safe asset supply. This is not only because its macro trends are very clear. At the same time, the credit rating of the Chinese government is actually underestimated, especially for international investors, it is unlikely to default. Therefore, in the new landscape, Chinese government bonds can also become an attractive safe asset for global investors. If everyone continues to buy, the yield of government bonds will continue to decline