To The Moon

Keypoints：

• Is Australia's Recession More Fearful than a US Recession?

• Will Australia's Recession be Severe? Understand the Background of Australia First

• Regarding Australian Interest Rate Hike and Australian Real Estate Investing

So far this year, under rate hike and recession forecast, the trend of the Australian stock market index $S&P/ASX 200(XJO.AU)$ ‘s decline was not as bear as US stock market index $S&P 500(.SPX)$.

Sept 21st, the FED announced a 75bps interest rate hike raising the benchmark interest rate to 3%-3.25%; almost all officials expected to raise interest rates to 4%-4.5% by the end of 2022.

“We’re determined to get to the right level of the policy rate in order to put meaningful downward pressure on inflation here,”

said by St. Louis Fed President James Bullard the end of September.

On September 6, the Reserve Bank of Australia (RBA)announced its interest rate decision, raising interest rates by 50 bps to 2.35%, the highest level in more than seven years, in line with Australia's broader expectations.

In the context of global interest rate hikes, future inflation, recession risks and other uncertain economic and market environments, how should investors make good asset allocation and protect their assets?

Tiger Trade recently invited Jason Zheng, the chairman of Richlink Capital Group., a guest on Tiger Live to share his insights on Australian economyand investing.

Richlink Capital Group is a global asset management organization featuring family offices, with branches in Sydney, Australia, Hong Kong, Shenzhen, Xiamen, and Beijing, China.

Brief introduction of Jason Zheng: He has worked in the secondary market for 20 to 30 years, and has experienced various market fluctuations and risks such as the 1997 Asian financial crisis and the 2008 global financial crisis. He also gives lectures at Tsinghua University, Peking University, Jiaotong University in China, including Michael Rui University in Australia.

The following are sumarizes of Professor Zheng's sharing on global interest rate hikes, recession-related, and Australian realestate investment content.

1. Under the continuing raise of interest rates globally, is Australia's recession fearful than a US recession?

Professor Zheng:First, we need to understand what is a recession? Recession does not refer to the demise of this comprehensive industry. In fact, when GDP falls by 2-3%, we can define it as a recession. If the United States continues to raise interest rates, it will definitely lead to a relative recession of its economy. The relative recession of the economy means that the development of all walks of life will be affected. Even if prices and living costs are under control, and the lives of ordinary people are better, business and economy will definitely be hit hard. This is a major issue facing the world. question.

2. Will Australia's recession be severe? Let's first understand what the economic background of Australia is?

Professor Zheng: Australia's dependence on China is very strong, especially on mining companies. In one year, the mining industry would export AUD 200 to 300 billion to China, and there are AUD100 billion imported to Australia. Although there are more imported products from countries and regions such as Vietnam and Thailand, there are still many Chinese products. The development of China's new energy vehicle industry is also very demanding for Australian lithium energy, including some hydrogen energy.

In addition, Australia is a country that exports resources, food, and agricultural products. Australia's domestic consumption of oil, coal, iron ore, and other resources is less than 5%, and Australia's grain itself consumes 30%. Australia is an exporter of 70% of the grain, and food grains, milk, and other different industries. Therefore, in terms of energy, the price of resources in Europe and North America has risen, and the price of resources in Australia will also rise.

Although the global economy has encountered some great challenges, the Australian economy has always been adjusted in a stable manner.The GDP rate of 3.6% is decent. Australia's unemployment rate is now also a record low, need more labors. So Australia's overall economy currently feels relatively healthy, in this condition, Australia's recession may be relatively less scary.

3. Regarding Australian Interest Rate Hike and Real Estate Market

Professor Zheng said: The United States has recently raised interest rates aggressively, with a target of more than 4% by the end of 2022. Australia may only raise interest rates by 0.6% and 0.25% in the next six months or even before the end of June 2023.

If there is another 50bps interest rate increase at the end of 2022, for every 50bps increase in Australia, you will need to pay an extra AU$250 in interest expenses every month if the household loan is AU$500,000. If the RBA added four times in a row, and the interest rate will touch 2.5%, you will have to spend an extra AU$1,000 every month. 

While the RBA has been stating that the expectation of raising interest rates in Australia is not as strong as the expectation of raising interest rates in the United States. So i think the price of real estate may not fall too much. Although after the pandemic, everyone has less money, less purchasing power, and lower confidence in real estate. If you still want to buy a house in the near future, you can still buy it, otherwise the price may continue to rise at the end of the year.

Please leave quesitons if you have.

Regarding how to invest in special Australian stock market, Jason Zheng also give detailed directions and specifical industries: Richlink Capital: Specific Investings Under AU Rate Hikes

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