Core Viewpoint - The article discusses the significant divergence between the 3-month HIBOR rate and the Federal Funds rate, highlighting a liquidity paradox in Hong Kong where low interest rates do not correlate with rising stock prices [1][3][5]. Group 1: Liquidity and Stock Market Relationship - After May 20, the inversion of the HIBOR rate exceeded 250 basis points, indicating a liquidity surplus in Hong Kong [3]. - Despite low funding rates, the Hang Seng Index only increased by 1.64%, suggesting that liquidity does not necessarily lead to stock market gains [5]. - The relationship between funding rates and stock prices is complex; low rates can lead to deposit outflows, which may suppress risk asset prices [9][12]. Group 2: Capital Flows and Currency Impact - The outflow of deposits in Hong Kong, due to low interest rates, does not lead to a decline in stock prices but results in stagnation [12]. - When capital flows out of Hong Kong, it converts local currency deposits into USD, leading to increased excess reserves and liquidity in the interbank market [14]. - The relationship between exchange rates and stock prices is direct: currency appreciation typically supports stock market gains, while depreciation can lead to declines [16]. Group 3: Monetary Policy and External Influences - The Hong Kong Monetary Authority (HKMA) injected significant liquidity into the market, with a total of 1,166 million HKD released over four days [18]. - The 3-month HIBOR rate fell to 1.32% due to both the HKMA's liquidity injections and foreign capital outflows [22][23]. - The HKMA's actions reflect a strategy to manage foreign capital flows, with the potential to adjust liquidity based on market conditions [25][27]. Group 4: Theoretical Implications and Market Behavior - The article suggests that the HKMA's large liquidity injections are not necessarily positive for the market, as they may be aimed at curbing excessive foreign capital inflows [32]. - The divergence between theoretical expectations and actual market behavior indicates a need for investors to trust market signals over theoretical models [32]. - The 3-month HIBOR rate is not a reliable indicator of Hong Kong stock market liquidity due to the complexities of capital flows [35].

Core Viewpoint - The recent legislative developments in the U.S. and Hong Kong regarding stablecoins, along with Circle's listing on the NYSE, have reignited discussions on the impact and implications of stablecoins in both traditional and Web3 finance [1][2]. Group 1: Stablecoin Types and Characteristics - Stablecoins can be categorized into fiat-collateralized, crypto-collateralized, commodity-collateralized, and algorithmic stablecoins, with fiat-collateralized stablecoins being the focus of regulatory scrutiny due to their significant issuance and connection to real-world assets [2][3]. - Fiat-collateralized stablecoins sacrifice decentralization and accept traditional trust risks, integrating into the sovereign credit system [3]. Group 2: Global Regulatory Trends - Since the introduction of the EU's MiCA, global regulators have prioritized fiat-collateralized stablecoins, focusing on non-bank payment institutions' regulatory frameworks, including AML, KYC, and asset segregation [4]. - The regulatory approach aims to enhance consumer protection and compliance within financial market infrastructures, especially given the increasing influence of stablecoins in cross-border payments and DeFi [4][5]. Group 3: Challenges and Opportunities - Despite the opportunities presented by stablecoin legislation, challenges remain, such as the inability to effectively manage market volatility and liquidity shocks, which could exacerbate instability in the crypto space [6][7]. - The push for a "chain-based Bretton Woods system" faces sustainability issues, as the inherent conflict between providing liquidity and maintaining value stability complicates the viability of stablecoins [6][7]. Group 4: China's Strategic Focus - China should prioritize the exploration of a fiat-collateralized stablecoin, particularly a renminbi stablecoin, to establish a presence in the global market, with a focus on high liquidity and low-risk assets [9][10]. - Regulatory frameworks should be developed for both onshore and offshore issuance of renminbi stablecoins, ensuring compliance with domestic and international regulations while promoting the internationalization of the renminbi [9][10].