Oil prices soar! Major Fed news! Chinese assets see explosive buying!

(Source: China Business News)

Reprinted from: China Business News

On March 13, Asian and Japanese stock markets all fell sharply, with Korean investors heavily buying Chinese assets drawing significant attention.

On March 12, Eastern US time, the three major US stock indices all declined by over 1.5%, experiencing widespread sell-offs. As concerns over energy prices and inflation heat up, market expectations for Fed rate cuts are decreasing.

Brent crude oil futures surged over 9%, settling above $100 per barrel for the first time since August 2022.

Chinese assets being heavily bought

On March 13, Asian and Japanese stock markets opened lower. The Nikkei 225 index once fell more than 1,100 points, breaking below 53,000, but the decline narrowed to 1.24%. The KOSPI index in Korea opened down over 3%, and by the time of writing, the decline had narrowed to 2%.

Takafumi Onodera, Head of Sales and Trading at Mitsubishi UFJ Trust and Banking Corporation in New York, stated that due to ongoing high oil prices and interest rates caused by tense Middle East tensions, the USD/JPY exchange rate could rise to 160 yen. Although Japanese authorities are expected to issue verbal warnings within the 155–160 yen range, actual intervention remains challenging because the yen’s weakness is driven by external shocks like geopolitical risks rather than fundamentals.

On the news front, recent data from the Bank of Korea shows that due to increasing concerns over potential AI bubble risks and profit-taking, foreign investors recorded the largest monthly net outflow from Korean stocks in February.

Notably, after the launch of the Chinese stock market in September 2024, by 2025, China has become Korea’s second-largest overseas investment destination for retail investors.

According to SEIbro data under the Korea Securities Depository (KSD), as of March 11, the top A-share stocks net bought by Korean investors in the past month are: Sany Heavy Industry, China Power Construction, Everbright Tech, XJ Electric, China Western Power, Zhejiang Energy, Changjiang Electronics Technology, China State Power Investment Corporation, and TBEA; the top Hong Kong stocks net bought are: China Energy Engineering, MiniMax, Harbin Electric, Lankang Technology, Goldwind, China Power, China General Nuclear Power, and Baidu.

Compared to 2025, the latest retail trading in Korea shows a strong HALO presence, with most of these companies in power equipment, engineering machinery, and chemicals—precisely the types of assets Goldman Sachs defines as HALO assets.

Hu Zhiwu, President of UBS China and Chairman of UBS Securities, stated that Chinese companies are continuously strengthening innovation in AI, high-end manufacturing, semiconductors, and new energy, reshaping global investors’ perception of Chinese assets. Chinese assets are shifting from “investment options” to “strategic must-haves,” creating historic opportunities for foreign financial institutions to participate in China’s high-quality development.

Brent crude settles above $100

Due to millions of barrels of oil stranded in the Persian Gulf, Brent crude oil futures surged over 9%, settling above $100 per barrel for the first time since August 2022. US West Texas Intermediate (WTI) crude rose by $8.48, a 9.72% increase, closing at $95.73 per barrel.

As of the time of writing on March 13, Brent was at $100.23 per barrel, and WTI at $95.38 per barrel.

On the news front, Iran’s new Supreme Leader Mojtaba Khamenei stated that the Strait of Hormuz should remain closed as a “tool to pressure enemies.”

The International Energy Agency (IEA) said that the Middle East conflict has caused the largest-ever disruption in oil supply. Due to the conflict, Iraq, Qatar, and other Gulf countries have cut daily oil output by at least 10 million barrels, nearly 10% of global demand. The agency warned that if shipping cannot resume quickly, losses will continue to grow.

The US Department of Energy announced it will release 172 million barrels from strategic petroleum reserves. At the planned release rate, this will take about 120 days, and next year, an additional 200 million barrels will be added to the reserves—exceeding current reserves—by supplementing the strategic stockpile by 20% above the withdrawal amount.

Vikas Devividi, Global Strategist at Macquarie Group, said, “A few weeks of closure of the Strait of Hormuz could trigger a domino effect, potentially pushing oil prices to $150 per barrel or higher.” Bloomberg economists believe that a three-month closure could push prices to $160 per barrel.

As energy prices and inflation concerns rise, market expectations for Fed rate cuts are decreasing.

Fed’s full-year rate cut expectations fall below once

On March 12, Eastern US time, all three major US stock indices closed lower: Dow down 1.56% at 46,677.85; S&P 500 down 1.52% at 6,672.62; Nasdaq down 1.78% at 22,311.98.

The Federal Reserve will hold a monetary policy meeting on March 17. Although recent inflation data shows overall price growth remains manageable, the impact of the ongoing 13-day Iran conflict and rising oil prices has not yet been reflected in the data.

Latest probabilities from FedWatch show that traders in the federal funds futures market have largely ruled out a rate cut in September, now believing the Fed may only cut once in December.

Rate swap contracts tied to the Fed meeting date also show that swap traders are no longer 100% certain the Fed will cut rates this year.

John Briggs, Head of US Rates at Natixis Investment Bank, said, “Concerns about inflationary pressures from rising oil prices, especially after Brent crude again surpassed $100 for the first time since 2022, have already compressed market expectations for rate cuts to just one, and that’s not even certain yet.”

Monica Gla, US Policy Head at Morgan Stanley Wealth Management, stated that historically, geopolitical-driven market volatility tends to be short-lived. However, if oil prices continue to rise, “the Fed’s response mechanism could become more complex, supporting prolonged high federal funds rates.”

Goldman Sachs expects the Fed to cut rates in September and December, as high inflation prevents earlier cuts, previously expecting rate cuts in June and September.

(Note: This article does not constitute any investment advice.)

Compiled by China Business News from CCTV News, Cailian Press, China Fund News, 21st Century Business Herald, and others.