US Bank Capital Flight: Rate Hikes, Failures, Asia Opp.
The Federal Reserve just released data last Friday, showing that in the week of March 15th, due to a series of bank failures in the United States that shook depositors' confidence, over 120 billion US dollars in deposits flowed out of community banks.
Elon Musk also criticized the Federal Reserve's interest rate hikes for causing depositors' funds to flee.
01, Capital Flight
The US economy is now trending towards recession. Due to the potential devaluation of the US dollar and the impact of consecutive bank failures in the United States, investors are withdrawing a large amount of investment funds from US banks. This has led to a significant outflow of funds from the US banking industry.
If left unchecked, it will affect the liquidity of US banks, leading to bank failures.
However, the wave of bank failures in the United States is due to the Federal Reserve's continuous interest rate hikes, which have caused the devaluation of US Treasury bonds.
During this period, banks in Hong Kong, China, have had to adopt a 997 working system, working even on weekends, to handle the influx of US dollar deposits. It is said that many wealthy Chinese have transferred their funds from US banks to banks in Hong Kong.
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Due to various factors in the United States, the US financial industry and banking system are unstable, so many investors have had to withdraw their funds from US banks. And since Hong Kong is a wealth management center, the best choice for Chinese is to invest their funds in Hong Kong, China.
After the bankruptcy of three banks in the United States, and the perception that even the safest Switzerland has seen the bankruptcy and acquisition of a large bank, in the future, for the world's wealthy, especially for China's wealthy, European and American banks are no longer the most stable choice for their capital investment.
Precisely because of this, capital is flowing into Asia, currently waiting for opportunities in Singapore and Hong Kong, China. In the coming period, these funds will continuously buy Chinese assets to achieve safe and stable value appreciation.02, Interest Rate Hike Failure
Currently, the Federal Reserve is still continuously raising interest rates, and the true purpose of the rate hikes is likely to suppress other countries, including the exchange rate of the Chinese yuan.
However, the results have proven that the Federal Reserve has failed.
The continued interest rate hikes by the Federal Reserve have not only failed to lower the exchange rate of the yuan but have also allowed us to reap the benefits.
Now, in order to alleviate the liquidity crisis in the banking industry, the United States is continuously raising interest rates while also continuously injecting liquidity. Through the Federal Reserve's discount window, the banking industry in the United States has obtained loans amounting to 152.9 billion within a week.
But what is worrisome is that the continuous injection of these funds has turned into an amount that depositors are continuously withdrawing and then transferring to other countries overseas.
In addition to the Federal Reserve being responsible, the U.S. Department of the Treasury should also bear some responsibility.
According to the original deposit system, deposits exceeding $250,000 are not insured, and Yellen previously publicly stated that she was unwilling to provide additional insurance coverage for this part of the assets, leading to a large outflow of depositor funds.
03, Chinese Assets
Some time ago, China's A-shares still experienced net sales of northbound capital, but recently, especially around the time of the Federal Reserve's interest rate hikes, northbound capital has shown a continuous buying trend.In addition to this, there is a significant amount of capital that has not yet been able to enter the mainland market, opting instead to shop in the Hong Kong market. This has also led to a recent surge in the Hang Seng Tech Index, indicating that funds are continuously buying Chinese assets.
The United States' attempt to suppress the exchange rates of other countries' currencies through interest rate hikes has apparently failed. However, unexpectedly, it has presented a generous gift to China.
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