Chinese markets likely to show little reaction to expected U.S. rate hike

Updated 2017-06-15 11:02:39 CGTN

Global markets are expecting the U.S. Federal Reserve to raise interest rates by at least 25 basis points to around 1 to 1.25 percent on Wednesday, but experts said China's A-share and currency markets will be relatively immune to the Fed's decision.

Wall Street saw some nice rises as investors patiently waited for word from the U.S. Federal Reserve on a possible interest rate hike. Major U.S. indexes had ended in the positive at Tuesday's closing.

China's A-share trading, however, has pretty much been doing its own thing. Experts point out that China's markets like most others already priced in the expected U.S. hike.

China's A-shares have been experiencing turbulence recently, causing new tightening regulations by China's regulators – slowing new IPOs and imposing bulk-selling restrictions, Shao Yu, Chief Economist of Orient Securities, told CGTN.

An increased interest rate could result in the U.S. dollar appreciating quickly. The Chinese central bank could feel forced to follow suit and raise its interest rate to stay competitive.

After the U.S. interest rate hike in March, China's central bank raised interest rates for reverse repose and medium-term lending.

But experts believe those measures may no longer be necessary as the country has updated its exchange rate mechanism to support the Chinese yuan.

Another U.S. interest rate rise is expected by the end of the year as Washington tries to gradually normalize its interest rates to suit an economic recovery.

In data released on Tuesday, the U.S. producer Price Index, which measures input costs for sellers, came in flat for May, largely due to sharp declines in costs for food and fuel.

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