Thought of monetary tightening impact on company valuation

Current world is flushed with money, supply of money is so large that interest become so low. It pushed up all the asset price.
When tightening happen, supply of money reduce. It put pressure on asset price.

Those company with high asset dependent base, its valuation will suffer.
It is because company usually finance the asset with financing. Tightening will not just putting pressure on the asset value, but will cause the interest rate to rise, which then reduce the EBIT coverage ratio and affect rating. Thus interest rate paid by the company will likely raise faster than the general interest rising trend. This will raise the cost of capital of the company too. Higher interest payment will reduce the future cash flow, and the reduced future cash flow discounted by higher cost of capital, further reduce the firm value.


Those company with asset light business model will outperform.

Bank will take a hit as its collateral asset under price pressure.

Insurance will likely do well as its liabilities is not asset base, but either event base or personal life base, and its income will rise upon rising interest rate.