As the world's largest economy, the United States has taken a crucial first step in its largest tax reform bill in 30 years.
Following the passage of the tax reduction bill passed by the U.S. House of Representatives last month, at 1:50 local time on December 2, the U.S. Senate passed the version of the tax reform bill with 51 votes in favor and 49 votes against it. The biggest impact of this tax change will be a dramatic drop in corporate income tax in the United States from 35% to 20%. However, Trump later said the result could be 22% or maybe 20%.
A figure to understand the United States tax cuts! What is the impact on the capital market and the Chinese economy?
Interpretation of the agency
After the United States implemented the tax reduction policy, the US stock market is likely to rise. The yield of the 10Y U.S. debt center is either upward or upward. Historical data shows that after the implementation of the tax reduction policy in the United States, the US stock market tends to rise further due to the favorable economic conditions in the United States and the improvement in the profit after-tax profits of enterprises. At the same time, as the U.S. economy accelerates and the inflation level tends to rise , Stacking the Federal Reserve to gradually accelerate the pace of rate hike, 10Y US bond yields central or upward.
After the United States implemented the tax reduction policy, the dollar index is not affected by the medium-term trend or the gold trend may be affected by the pace of the Federal Reserve's interest rate hike. Historical data shows that after the U.S. tax cuts, the U.S. dollar has shown an upward trend in the medium term, but the trend has not changed in the medium term. Meanwhile, the gold trend has been crushed by the Federal Reserve's pace of raising interest rates.
Crude oil and copper prices are on the rise after the United States implemented tax cuts. Historical data show that after the U.S. tax cuts, crude oil and copper prices are rising. Behind this, or with the spillover effects of tax cuts in the United States. As the United States cuts taxes, it will probably accelerate the improvement of the global economic climate and thus support the prices of raw materials such as crude oil and copper.
From the point of view of the impact on market asset prices, the progress of tax reform will help boost market sentiment and the positive effect on corporate profits will also provide fundamental support to the US stock market. This is in line with our expectation in 2018 that the basic market for US stocks Face up, valuation down the overall direction fit. In fact, since this year, especially since September, every major breakthrough in tax reform policies will provide some support to the market sentiment.
However, it is also important to note that even though the Senate version of the tax reform package has been passed, both houses still need to close the differences (such as the beginning of the corporate income tax cut) to reach a uniform version of the bill and get both houses The vote was passed by all, and there was also a possibility of compromise below the current expectations in the final version. If so, there is a risk of a reversal of expectations. Of course, at the short-term transaction level, due to the continual calculation of expectations, it is also necessary to guard against the pressure of profit taking and profit taking after tax reform is good.
In addition, the expected growth in the future and the expansion of the fiscal deficit may expand or to some extent support the dollar and the United States debtinterest rateThe trend. Market style and plate, the expected improvement in the growth,interest rateThe rise may be more conducive to the value of the subject of the performance of the banking sector, is not conducive to the growth stocks.
On the one hand, as part of the proactive fiscal policy, the drastic tax cuts are expected to strongly promote economic growth. On the other hand, the rapid economic growth or to further promote the decline in unemployment and increase inflation, and boost the Fed to speed up the pace of increase and shrink the process. The role of the two on the economy or offset each other. Meanwhile, raising interest rates and returning overseas profits will help the dollar to strengthen.
Overall, we think the negative impact of tax cuts on China's capital markets is limited. The changes and status of China itself and the world pattern make the analysis of this policy not simple and historical analogies, potential improvements in exports and competition after investment returns The change of pattern has a positive impact on domestic enterprises. The strong US dollar triggered the pressure of RMB devaluation and the return of potential short-term capital gains. The United States has a potential impact on the market. However, on the whole, the medium and long term have certain positive impact, but the impact is generally limited . The key factor that decides foreign investment in the investment in China's entities and capital markets in the future lies in the progress of China's economic restructuring, technological changes and the direction of industrial production and capacity flow in the world.
Impact: 1) For the United States: U.S. deficits, debt and the economy will all accelerate. 2) For China's economy, the successful tax cuts of the United States will drive its economic recovery and thus help China's exports to the United States, thus boosting the upward investment in China's manufacturing investment, especially in the high-end equipment manufacturing industry. 3) In the short term, capital will not be returned to the United States in large quantities. On the one hand, China is still actively pushing tax cuts and reductions in recent years. On the other hand, China's labor costs still have advantages over the United States. 4) US tax cuts really put pressure on China's fiscal policies, especially the tax cuts. In recent years, China has been tax cuts, and constantly improve the tax system, the current macro tax burden in the United States is still slightly higher than China. The next stage: the combination of individual income tax and tax consolidation is expected to be implemented. The integration of various grades of the VAT rate and the reduction of the tax rate will also have the effect of tax reduction.
Former open source Yang Delong said Trump's tax reform plan was passed by the U.S. Senate. According to Trump's tax relief plan, the tax reduction and exemption for the next 10 years will amount to about 1.4 trillion U.S. dollars, which will have a significant stimulating effect on the U.S. economy . Tax relief program gained By eliminating the uncertainty and increase corporate earnings expectations, may lead to further gains in US stocks, leading the global bull market to accelerate. For the first time in 30 years, the MSCI ACWI Global Stock Index recorded a thirteen consecutive rally with a cumulative increase of 21.3%. since this yearGlobal stock marketEverywhere, showing the most significant general upsurge in recent years, compared to the Chinese stock market laggard, strong demand for compensatory growth. U.S. tax cuts have stimulated a faster recovery of U.S. economy and boosted China's export growth to the United States. It is estimated that in 2018, A-share market will continue.
Li Daxiao, director of Yingda Securities Research Institute, said that this is a major tax adjustment in the United States. Its tax reduction efforts are the largest in the history of the United States and a major victory since President Trump assumed office. This has notable stimulating effect on U.S. economic growth. It also has a positive impact on the global economy. It is also an important promoter of the strength of the U.S. stock market and has a positive impact on the global stock market.
The macro-analysis team at the Yangtze River believes that the import growth rate of the three rounds of tax cuts in the history of the United States all rose sharply.
In 1981, 1986 and 2001-2003, the United States implemented a total of three rounds of tax cuts. After the implementation of tax cuts in each round of the United States, its domestic private consumption and investment growth have both risen significantly. Driven by the improvement in domestic demand, the import growth of the United States has risen sharply, including substantial expansion in the import of minerals, chemicals and machinery and equipment. During the tax cuts, stimulated by the U.S. demand, the growth rates of the world's major manufacturing-oriented countries' exports have greatly improved. Under the division of labor in the global value chain, consumer countries represented by the United States provide demand while producing countries represented by China, Germany and Japan are responsible for production.
Therefore, if the current round of tariff reductions is implemented in the United States and Rwanda, the export growth of China's electromechanical, chemical, plastic, rubber, basic metal and instrument manufacturing industries will increase significantly. On the one hand, after the U.S. tax relief in 2001, corresponding to the improvement in the import of the U.S. trade, Germany and Japan expanded their exports to such industries as the production of electromechanical, chemical, plastic, rubber, basic metal and equipment. On the other hand, since 2001, China's competitiveness in the above industries has increased substantially. The proportion of imports of these industries in the United States has basically exceeded that of Germany and Japan. Therefore, the current round of the United States tax cuts, exports of China's electrical and mechanical, chemical products, plastics and rubber, basic metals and equipment manufacturing industries will significantly improve.
According to Founder's statistics, Yang Weiwei believes that this will not result in excessive outflow of capital and will not exert too much pressure on the exchange rate. He further said that the devaluation of the renminbi will surely rise but will not lead to a sharp devaluation of the exchange rate because the domestic exchange rate formation system had undergone an anti-marketization change in May this year. When the counter-cyclical factor is introduced, Restrictions on exchange rate fluctuations resumed, even if the interest rate parity pressure on the RMB exchange rate, there will not be much devaluation losses. Yang Wei said that there may be more overseas-funded enterprises going to sea, but not too violent and will not have much impact on monetary policy. The key issue currently facing monetary policy is still the domestic bond market is also limited.
According to the analysis of CITIC Securities, the Trump tax reform bill was finally passed by the Senate. This is the largest adjustment made by the U.S. tax law in more than 30 years and the first victory of Trump's economic stimulus after taking office, in line with market expectations. Tax reform bill finally passed, the short-term impact on capital flows may be more significant, good dollar and US stocks.
The dollar index will be at least six months relatively strong. On the one hand, the tax reform on economic stimulus, most of the capital flow may occur in 2018, pushing up economic growth expectations, inflation expectations, the Fed is likely to accelerate the pace of austerity; the other hand, the European Central Bank cut QE in 2018 at least six months after the start of In the face of the vacuum of monetary policy in the period of time, the interest rate hike expected by the ECB will not emerge until the end of 2018. It should be noted that the weakening of the U.S. dollar is one of the major factors causing the global risky assets to rise sharply in 2017, while the U.S. dollar may be relatively strong in 2018 (at least the first half of the year), together with the expected impact on the economy and inflation after the introduction of the tax reform in the first quarter Positive boost, then the Fed in the first half of 2018 may pass partial hawkish monetary policy stance to the market, resulting in some pressure on mid-term asset prices. In the short term, the passage of tax reform will help to boost market confidence. The drop in corporate tax will help increase EPS and offset the current valuation pressure on US stocks. The return of funds may also stimulate enterprises to increase their investment, dividends and repurchases, etc., which will benefit the US stocks.
Essence Securities analysts believe that the bill will further promote the United States economic recovery and boost the global economy is conducive to China's exports are expected to increase. China has previously proposed a supply-side reform focusing on "three reductions, one reduction and one subsidy". We believe that in addition to the "lowering costs", in addition to the cost of housing rent currently under consideration, the future financing costs of enterprises and other corporate burdens will be further implemented.
In the current position, investors have reason to be more positive and optimistic about the market. Structurally, the fundamentals of the supply side of cyclical stocks (limited capacity, low inventories, strong spot prices) have not changed, and the demand is expected to have some transaction value in the short term after being repaired. Based on the medium-term perspective of the New Year's Eve , We are more optimistic about technology stocks.
In the investment strategy, it is recommended to configure the concerned insurance, aviation, electronics, communications, chemicals and so on. Topics focus on semiconductors, smart manufacturing, Xiong, Hainan and so on. Worth mid-term attention: "China Chip" (SMIC, VGIC, Zhongke Dawning, Changdian Technology, etc.), Artificial Intelligence (IDF, NavInfo, etc.), 5G / IoT (ZTE, Yi Tong Century, etc.), intelligent manufacturing (the Yellow River Whirlwind, Huichuan Technology, etc.), integration of civil and military (Reiter shares, Tianyin mechanical and electrical, etc.).