was stimulated by the positive news, and the three major A-share indexes opened higher collectively.
Recently, the market risk preference has rebounded significantly, the equity market is improving, and many emerging market currencies have also ushered in appreciation.
Analysts believe that the interest rate gap between China and foreign countries is still at a high level and RMB equity assets are undervalued. As my country's capital market continues to open up, foreign capital will further increase its investment in RMB assets, and the A-share market is expected to benefit.
The RMB exchange rate against the US dollar rose sharply
On the 13th local time in the United States, the RMB exchange rate against the US dollar soared sharply, rising strongly above 6.9!
USD fell sharply against the onshore RMB
On January 13, data from the China Foreign Exchange Trading Center showed that the RMB against the US dollar mid-price rose by 88 basis points to 6.9263.
On the same day, onshore and offshore RMB both rose sharply against the US dollar, among which the onshore RMB was 6.8942 against the US dollar, up 348 points from the previous trading day, setting a new high since August 1, 2019; the offshore RMB rose 315 points to 6.8923.
As of 14:10 today, the onshore RMB was 6.8789 against the US dollar. Since the low point of 7.1854 on September 3, 2019, the RMB has risen by more than 3,000 basis points so far! In other words, if you exchange 50,000 US dollars, you can save 15,000 yuan now. This is undoubtedly good news for Chinese people traveling abroad.
The US Treasury Department released its semi-annual exchange rate policy report on the 13th, canceling the recognition of China's "exchange rate manipulator". On August 6, 2019, the US Treasury Department listed China as a "transfer rate manipulator", which is the first time the United States has identified China as a exchange rate manipulator in 25 years.
At the press conference on the 13th, the US Treasury Department also released its first foreign exchange market report since August last year. In the report, the US Treasury Department believes that "China has made a high standard commitment to restraining the impulse of depreciation." The report also pointed out that the RMB has been rising steadily recently.
RMB exchange rate has risen steadily
Wind data shows that from January 5 to 11 this year, the onshore RMB rose by 525 basis points against the US dollar, an increase of 0.75% in a week.
Looking at 2019, from the beginning of the year to the end of April, the RMB exchange rate against the US dollar rose from 6.8518 to 6.7366, a slight appreciation. Entering May, the RMB exchange rate against the US dollar suddenly fluctuated significantly, and it depreciated rapidly by 3% in the short term. However, after mid-June, the peak turned around and returned to a slight upward state. Although the RMB has faced depreciation pressure again, at the end of the year, the RMB has once again experienced a wave of appreciation.
Today, both onshore and offshore RMB rose sharply against the US dollar, exceeding the 6.9 mark, the first time since July 2019.
Offshore RMB against the US dollar intraday trend
ICBC International Chief Economist Cheng Shi said that
"Taking the '811 exchange reform' in 2015 as a watershed, the RMB exchange rate has completely bid farewell to the unilateral appreciation model, and elastic two-way floating has gradually become the new normal. Since 2017, the characteristics of this two-way fluctuation have become more significant and the operating mode is more diverse."
Looking at the past decade, the overall appreciation of the RMB is still considerable. The "China Monetary Policy Implementation Report for the First Quarter of 2019" released by the People's Bank of China shows that since the reform of the RMB exchange rate formation mechanism in 2005, by the end of March 2019, the centralized appreciation of the RMB exchange rate against the US dollar has been 22.92%.
Foreign investment may promote the appreciation of the RMB
Chief researcher of China Minsheng Bank believes that in the short term, the appreciation of the RMB is mainly affected by fundamentals and news factors. Judging from fundamental factors, my country's PMI index has been 50.2 for two consecutive months. Standing above the economic boom and bust line, the macroeconomic operation has shown a trend of stabilization and recovery, supporting the appreciation of the RMB. Judging from news factors, the market's risk aversion sentiment has declined, and the market's expectations for the next stage of the RMB exchange rate are optimistic.
Wen Bin believes that in the medium and long term, in the context of China's financial market continuing to expand its opening up to the outside world, international investors continue to be optimistic about China's capital market. Moreover, from a global perspective, the valuation level of China's stock market is low and the bond yield is relatively high. International institutional investors are enthusiastic about China's bonds and stock allocations. Capital account inflows will help maintain a balance of payments and promote the appreciation of the RMB.
Institution: exchange rate is expected to help stocks and bonds get out of double bull
CITIC Securities analyst Mingming Bond Team Research Report believes that the RMB exchange rate has performed well recently, with many rapid appreciation intradays. In addition, the US Treasury Department announced the cancellation of the recognition of RMB exchange rate manipulators. As the exchange rate strengthens, capital inflows tend to grow, and the positive for domestic asset prices is clear, and stocks and bonds are expected to get out of the double bull.
Specifically, the appreciation trend of RMB has actually begun to occur since September last year. In terms of the stock market, the stock market has started an upward trend since December. The current linkage between the RMB exchange rate and the A-share market has increased, and the risk preferences and capital inflows brought about by the rise in exchange rate will push up the stock index. For the bond market, under the requirements of the ternary paradox, a stronger exchange rate will reduce external constraints on monetary policy, and domestic monetary policy easing is more powerful, which will benefit the bond market.
In addition, the research report also analyzes the market mechanism of "stock and exchange linkage":
While the RMB exchange rate is rising, the stock market also climbs all the way into December, and the exchange rate is the leading indicator of the stock market. The linkage mechanism between the exchange rate and the stock market, on the one hand, has the reasons why the two face a large overlap influencing factors. On the other hand, consistent risk sentiment will also have an impact on stock exchanges and increase linkage. Judging from the correlation between the RMB exchange rate and the Shanghai Stock Exchange 50, CSI 500 and GEM , the correlation between the RMB exchange rate and the CSI 500 and the GEM is stronger, reflecting that small and medium-sized enterprises are more significantly affected by fundamentals and risk sentiment factors.
For the bond market, the research report believes that:
The strengthening of the RMB exchange rate provides space for monetary policy easing. At present, monetary policy has the need to further relax its monetary policy from the perspective of fundamentals stabilizing growth or cost reduction, and interest rate cuts support the implementation of interest rate cuts in terms of effectiveness and policy space. The overall environment facing the bond market is relatively friendly, with sufficient allocation of funds at the beginning of the year, geopolitical uncertainty reduces market risk preference, and overall liquidity is loose, and we continue to be optimistic about the decline in long-term interest rates.
