STOCKS | Market Faces High Volatility Amid Tightening Liquidity

According to Jin10, a report by BOC Securities on May 31 indicated that the market has experienced sustained high volatility this week. Structurally, the previously strong technology sectors are facing pressure, prompting a rebalancing of funds between high and low certainty sectors. On the driving factors, oil prices remain high, and expectations of overseas liquidity tightening have recently intensified. This is compounded by the formal appointment of Kevin Warsh as the new Chair of the Federal Reserve, which has heightened market expectations of a hawkish U.S. monetary policy. Currently, there is a noticeable increase in expectations for a Fed rate hike within 2026. The combination of high oil prices and high interest rates has significantly constrained the potential for easing in the global liquidity environment. On the industrial front, the anticipated peak in summer electricity demand is catalyzing the power sector, while reduced coal supply is driving prices higher. During this period of increased market volatility and weak fundamental signals, funds are placing greater emphasis on dividend returns and the relative safety margin of lower-positioned assets.