CICC: Global Liquidity Remains in Easing Territory, Expected to Expand Further in H2
Nashnova编辑部
CICC's latest report finds global liquidity has not confirmed a tightening inflection — M1 and M2 remain in expansion — and expects further easing in the second half, a setup that would favor tech equities, gold, and base metals first.
Where does global liquidity actually stand?
CICC aggregated central-bank balance sheets, M1, and M2 across six major economies — China, the US, the eurozone, Japan, the UK, and Canada. M1 and M2 are still expanding. Central-bank balance-sheet growth has turned slightly negative, but the decline is flattening.
This means → the global "tap" has not been shut off — the flow is just slower than last year.
Country-level contributions diverge sharply: China is the largest positive contributor across all three metrics. Japan is the only drag — its M1, M2, and central-bank assets are all still contracting.
Can liquidity data predict asset performance?
CICC found that M2 year-on-year changes across major economies lead US-China equity moves by about three months and commodities by about six months.
In plain terms = M2 acts as a leading indicator: money loosens first, stocks follow; commodities catch up a few months later.
Even after stripping out China's M2, the remaining economies' M2 growth still leads global asset performance significantly. This reflects that the easing signal is not a China-only story.
What does CICC mean by "three false risks"?
In early June, CICC labeled geopolitical escalation, sticky inflation, and Fed tightening as "false risks" — threats that look alarming but are unlikely to materialize.
Two months of data have partly validated that call: US June CPI fell 0.4% month-on-month in headline terms; core CPI was nearly flat. The July Fed meeting produced no hike and a clear dovish signal. July nonfarm payrolls fell by 23,000, with the prior month revised sharply lower.
This means → cooling inflation, weakening employment, and a dovish Fed — all three lines now point to "peak tightening is behind us."
Is inflation really still cooling?
CICC projects July US headline CPI at roughly +0.1% month-on-month, bringing the year-on-year rate down to 3.4%. Core CPI is expected at +0.2% month-on-month, with the annual rate falling to 2.5%.
Sub-component models show core goods, shelter, and other key items continuing to weaken — inflation should keep improving over the coming months.
Some worry that electronics price hikes could reignite inflation. CICC did the math: "computers, peripherals, and smart-home assistants" carry a CPI weight of just 0.3%. Even if the entire sub-component surged 20%, the maximum CPI impact would be roughly 0.06 percentage points — negligible.
Is Fed Chair Warsh actually hawkish or dovish?
CICC argues that Kevin Warsh talks hawkish on the surface but acts in a way that points to "hawkish in name, dovish in substance."
He has downplayed the dot plot — the Fed's tool for signaling rate expectations — proposed new inflation metrics, and folded AI into the policy reaction function. The real intent behind these moves may be to build a fresh policy rationale for cutting rates sooner.
In plain terms = he says "no rush to cut," but his hands are already building the staircase for a descent.
What does CICC recommend for asset allocation?
Overweight A-shares, Hong Kong equities, and gold; market-weight US equities. Tech fundamentals remain strong: Q2 Microsoft Azure revenue grew 43% year-on-year, Amazon AWS revenue grew 37%, and major tech firms maintained or raised AI capital spending.
A-share tech crowding has eased: TMT turnover share fell from a record 52% to 42%, and margin balances dropped ¥387.6 billion from the June peak — risk-reward has improved.
On gold, global central banks bought a net 289 tonnes in Q2, up 62% year-on-year — a record for any second quarter. CICC sees the gold bull market intact; the recent pullback opens a window to add. Base metals (copper, aluminum) are rated overweight on dual tailwinds of liquidity improvement and AI-related physical investment. Oil: hold, do not chase. US Treasuries: market-weight, add duration on dips to hedge equity volatility. Chinese government bonds: underweight, given low yield levels and limited return potential.
Content is for reference only, not financial advice.