Iron Ore and A-share Market Weekly Report and Global Capital Market Weekly Report

The Federal Reserve raised interest rates by 25 basis points in May. US employment data is still strong, the overseas banking crisis still exists, and market confidence is insufficient. $SSIF DCE Iron Ore Futures Index ETF(03047.HK)$

The phantom “idling” of capital is intensifying, and part of the capital is stranded in the financial system, which is closely related to the decline in derivatives between residents and enterprises due to weak housing purchases. As can be seen from changes in bank credit balance sheets, the prominent change in funding sources since the end of last year is that residents' deposit contributions are high and financial bond financing used to supplement debt has shrunk markedly; on the capital use side, when residents' demand for loans is insufficient, banks have relieved the pressure on asset allocation by increasing investment in bonds. Narrow corporate interest spreads, divergence in deposit and loan growth, etc., may mean that it is not common for companies to arbitrage through deposits and loans. It is theoretically possible to deposit corporate loans and then deposit them in a bank for arbitrage. In reality, interest rates on some corporate loans may be less than 2%, but there is not much room for arbitrage overall. The weighted average interest rate for corporate loans newly issued in March was 3.96%, which is significantly higher than the deposit interest rate of various banks, so there is no situation where corporate deposits grow faster with loans. Where did all the money go? Enterprises went to manufacturing, infrastructure, and service industries. In the early days of economic recovery, residents increased consumption and operating loans, it was quite common for capital to idle; since the beginning of the year, most capital flows to entities, and corporate loans mainly went to manufacturing, infrastructure, and services. In the first quarter, corporate medium- to long-term loans contributed more than 60% of all new loans. Among them, medium- to long-term loan balances in the manufacturing industry increased by 41.2%, and medium- and long-term loan balances in the infrastructure and service sectors without real estate all grew by more than 15%, contributing 19.5%, 32.3%, and 46.0%, respectively. Residents are increasing their consumption and operating loans, while early loan repayment, etc. are dragging down the growth of housing loans. In the first quarter, residential loans rebounded steadily. Among them, operating loans and consumer loans without mortgages grew at an accelerated pace, reaching 18.8% and 11% respectively, contributing 81.3% and 11.6% of the increase respectively, or mainly due to the restoration of offline consumption and business activities brought about by the recovery of the scenario; marginal improvement in commercial housing sales, but housing loan growth continued to slow due to early loan repayment. As the effects of financial support for entities gradually become apparent, the momentum for economic recovery will continue to increase, and it is possible to be more “optimistic.” The growth rate of effective social finance, represented by medium- to long-term funding sources for enterprises, bottomed out and rebounded in mid-last year; according to the empirical rule of leading the economy by about 2 quarters of effective social finance changes, this round of credit expansion will drive the economy to bottom out in early 2023, and the economic indicators for the first quarter have already been reflected. Interactions such as capital flow and people flow are expected to drive continued economic recovery. $CSI 300 Index(000300.SH)$

As we approach the peak of interest rates in this cycle, we notice that current forward interest rates have priced America's drastic steepening, and at this stage of the cycle, the implied volatility in every market is abnormally high. This supports our view that front-end interest rates will be higher in the US, and that the steep risk of a 2-year or 10-year yield curve would be better reflected in the UK or Europe. $S&P Global(SPGI.US)$