The global equity market is expected to enter a bearish period early next year and bottom out in 2018, Mark Jolley, equity strategist at CCB international Securities Ltd., told the Hong Kong Economic Journal.
Jolley based his forecast on the cost of funds through a benchmark index comprising the interest rates of 38 countries.
The benchmark can gauge the risk appetite in global markets, with a financial crisis evident each time the cost of funds doubles, he said.
Jolley also forecast that the US dollar will keep its strength and peak no sooner than 2020, following the resumption of an upward cycle of the federal funds rate as expected by the end of this year.
China, on the other hand, has room to implement more monetary easing measures given the high levels of its reserve requirement ratio for banks and real interest rates, he said.
Nonetheless, the Chinese stock markets, including A and H shares, are still under deleveraging pressure, which is not likely to bottom out until the middle, if not the end, of next year, he added.
Jolley expects the Hang Seng Index to fall this month and the next before rebounding in October to hit 28,500 points by the end of the year.
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