At 3:00 a.m. on Dec. 17 (Beijing time), U.S. Federal Reserve decided to raise benchmark interest rate by 25 basis points for the first time in nearly a decade. The start of an interest-rate rise cycle signals that the U.S. economy has recovered. While the U.S. dollar gains the foundation to appreciate, RMB will depreciate against U.S. dollar. A rate hike cycle of the U.S. may benefit China’s export-oriented industries like textile and foreign trade, but strong dollar may hurt commodity market. However, industrial insiders analyze that from market reactions towards U.S. rate hike in history, commodities tend to rise instead of declining, mainly as full release of bad news is good news in the end.
[Traditional impacted industries]
>> Textile
Textile industry has long been susceptible to the adjustment of exchange rate and export rebates. U.S dollar will depreciate following U.S. rate hike and optimistic U.S. economic outlook. The rise of exchange rate of U.S. dollar against RMB will benefit the export of China’s textile products.
Relevant companies: Lianyungang Ideal Group Co., Ltd. (000626.SZ), Henan Rebecca Hair Products Co., Ltd. (600439.SH)
>> Foreign trade
Foreign trade export is also a main industry affected by exchange rate. Weak RMB contributes to the increase of export. Foreign trade industry will improve.
Relevant companies: Shanghai Material Trading Co., Ltd., (600822.SH), Sinotrans Air Transportation Development Co., Ltd. (600270.SH), Wuhan Double Co., Ltd. (600136.SH), Xiamen ITG Group Corp., Ltd. (600755.SH).
>> Gold
U.S. dollar keeps an uptrend, and the market previously expected that economy of the U.S. is more likely to recover. Under this background, demands for the hedging function of gold will further weaken. To this respect, a bearish trend may press on gold, after the U.S. entered into a cycle of interest-rate rise.
>> Non-ferrous metal
Traditionally speaking, increased interest rate in the U.S. and strong trend of the U.S. dollar will cause a bearish trend for the commodity prices. Dane Davis, analyst of Barclays, previously believed that the copper price will decline on the day when the Fed announces to raise the interest rates.
[Different Market Views]
>> Gold
Due to that the gold price previously dropped to a historic low, some analysts indicate that the Fed’s raising interest rates this time possibly has limited impact on gold, as the market obviously expected that the Fed would raise the interest rates.
>> Non-ferrous metals
In history, metal sector mainly maintained an uptrend for a medium and long term, after the Fed raised the interest rates for the first time in each cycle. Based on statistic rule, once the expectation of interest rate rise is realized, the U.S. dollar will enter into a stage of adjustment, and metal sector is probably to gain a wave of rebound. Various metals, such as cobalt, nickel and aluminum, are likely to be purchased and stored, and investors should grasp the transaction opportunities driven by events. A few days ago, media reported that China Nonferrous Metals Industry Association suggested the government buying 900,000 tons of aluminum, 30,000 tons of refined nickel, 40 tons of indium and 400,000 tons of zinc, to digest the surplus capacity; the metal prices are likely to touch the bottom and then rebound when the purchase and storage are carried out.
[Traditional impacted industries]
>> Textile
Textile industry has long been susceptible to the adjustment of exchange rate and export rebates. U.S dollar will depreciate following U.S. rate hike and optimistic U.S. economic outlook. The rise of exchange rate of U.S. dollar against RMB will benefit the export of China’s textile products.
Relevant companies: Lianyungang Ideal Group Co., Ltd. (000626.SZ), Henan Rebecca Hair Products Co., Ltd. (600439.SH)
>> Foreign trade
Foreign trade export is also a main industry affected by exchange rate. Weak RMB contributes to the increase of export. Foreign trade industry will improve.
Relevant companies: Shanghai Material Trading Co., Ltd., (600822.SH), Sinotrans Air Transportation Development Co., Ltd. (600270.SH), Wuhan Double Co., Ltd. (600136.SH), Xiamen ITG Group Corp., Ltd. (600755.SH).
>> Gold
U.S. dollar keeps an uptrend, and the market previously expected that economy of the U.S. is more likely to recover. Under this background, demands for the hedging function of gold will further weaken. To this respect, a bearish trend may press on gold, after the U.S. entered into a cycle of interest-rate rise.
>> Non-ferrous metal
Traditionally speaking, increased interest rate in the U.S. and strong trend of the U.S. dollar will cause a bearish trend for the commodity prices. Dane Davis, analyst of Barclays, previously believed that the copper price will decline on the day when the Fed announces to raise the interest rates.
[Different Market Views]
>> Gold
Due to that the gold price previously dropped to a historic low, some analysts indicate that the Fed’s raising interest rates this time possibly has limited impact on gold, as the market obviously expected that the Fed would raise the interest rates.
>> Non-ferrous metals
In history, metal sector mainly maintained an uptrend for a medium and long term, after the Fed raised the interest rates for the first time in each cycle. Based on statistic rule, once the expectation of interest rate rise is realized, the U.S. dollar will enter into a stage of adjustment, and metal sector is probably to gain a wave of rebound. Various metals, such as cobalt, nickel and aluminum, are likely to be purchased and stored, and investors should grasp the transaction opportunities driven by events. A few days ago, media reported that China Nonferrous Metals Industry Association suggested the government buying 900,000 tons of aluminum, 30,000 tons of refined nickel, 40 tons of indium and 400,000 tons of zinc, to digest the surplus capacity; the metal prices are likely to touch the bottom and then rebound when the purchase and storage are carried out.
Translated by Jelly Yi and Adam Zhang
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