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Data is a treasure

Data treasure

Less worries about stock trading

In the past three trading days, the RMB has continued to rise sharply. In the morning trading today, the RMB rose by more than 100 points. At the same time, the US dollar index also fell sharply, and it fell below the 102 mark last night. Correspondingly, the Japanese yen, Korean won, Thai baht, etc. continued to rise sharply this morning. At this time, there were four major news about the RMB:

First, the People's Bank of China announced yesterday that on the same day, Pan Gongsheng, Governor of the People's Bank of China, and Nguyen Thi Hong, Governor of the State Bank of Vietnam, signed the "Memorandum of Understanding on Cooperation between the People's Bank of China and the State Bank of Vietnam" to further promote cooperation between the two sides in the fields of local currency settlement, local currency swaps and cross-border payment interconnection.

Second, the National Foreign Exchange Trading Center issued an announcement that the Qatar Central Bank meets the requirements for membership of the interbank foreign exchange market and will become a member of the interbank foreign exchange market from August 19, 2024, and can engage in RMB foreign exchange spot and forward transactions.

Third, there are positive expectations for real estate again. Some market expectations say that relevant parties may increase support for land acquisition and storage, promote the reduction of existing mortgage interest rates, and issue working capital loans to real estate companies. The momentum of continued easing of policies is expected to increase, and relevant policies may be implemented faster.

Fourth, on the morning of August 20, the People's Bank of China authorized the National Interbank Funding Center to announce that the loan market benchmark rate (LPR) on August 20, 2024 will be: 1-year LPR is 3.35%, and LPR for more than 5 years is 3.85%, which is consistent with last month.

Changes in the foreign exchange market

Recently, the RMB has been rising continuously, and currencies in the Asia-Pacific market have also been strengthening. Correspondingly, the US dollar index has begun to weaken. In the early trading today, the RMB rose again by nearly 100 points, and the offshore USD/RMB exchange rate once reached around 7.12.

In fact, from an investment perspective, this phenomenon is worth paying attention to. Historically, under the background of the continued weakening of the US dollar, the liquidity tension in emerging markets will be alleviated, and the valuation of equity markets will usually be improved. Today, the biggest risk of dollar depreciation seems to be the reversal of the yen carry trade. However, judging from the trend of US stocks last night, relevant parties seem to be easing this pressure. For example, SOFR has seen a sharp downward trend.

　　

From the perspective of the RMB exchange rate market expectations, Nanhua Futures believes that according to the "China Monetary Policy Implementation Report for the Second Quarter of 2024", the central bank is expected to gradually play a decisive role in the formation of the exchange rate, but timely guidance of the exchange rate trend will still be the main theme. In terms of supply and demand, the pressure of net outflow of cross-border funds has eased. Due to the recent sharp fluctuations in the spot exchange rate of the US dollar against the RMB and the rapid decline to the low point of the year, the settlement rate has risen, but the market still has different expectations for the future trend of the spot exchange rate of the US dollar against the RMB, and the long and short forces in the market are still stalemate.

Ping An Securities believes that in the stage when broad carry trades cool down and net exchange rate rises, the RMB exchange rate tends to show stronger resilience than the US dollar index. The net exchange rate is mainly affected by interest rate differentials and exchange rate expectations, and is expected to rebound marginally thereafter. On the one hand, it is expected that as the US economic growth rate slows down and the Federal Reserve starts to cut interest rates, the degree of short-term interest rate inversion between China and the United States is expected to converge marginally. On the other hand, domestic fundamentals still need to be repaired. In addition, tariff risks still need to be paid attention to. If Trump comes to power and imposes tariffs on China, expectations of RMB depreciation and carry trades may heat up again.

Big news for the RMB

But the positive factors of the RMB are gradually accumulating.

First, on August 19, Pan Gongsheng, Governor of the People's Bank of China, and Nguyen Thi Hung, Governor of the State Bank of Vietnam (BPV), signed the Memorandum of Understanding on Cooperation between the People's Bank of China and the State Bank of Vietnam to further promote cooperation between the two sides in the fields of local currency settlement, local currency swaps and cross-border payment interconnection.

Secondly, according to the China Foreign Exchange Trading Center on August 19, according to the Announcement No. 31 of the People's Bank of China (2015), the Qatar Central Bank meets the conditions for membership of the interbank foreign exchange market and will become a member of the interbank foreign exchange market from August 19, 2024, and can engage in RMB foreign exchange spot and forward transactions. In addition, as of the end of July 2024, there were 150 direct participants and 1,401 indirect participants in the CIPS system. CIPS system participants are distributed in 117 countries and regions around the world, and the business can cover 184 countries and regions around the world through more than 4,700 corporate banking institutions.

Third, and most importantly, the pattern of real estate policies continuing to warm up continues to expand. Recently, the market has expected that relevant parties will increase support for land acquisition and storage, reduce the interest rates of existing mortgage loans, and issue working capital loans to real estate companies.

According to Huatai Securities, the July data showed that the fundamentals of the real estate industry are still in adjustment: the year-on-year decline in development investment has widened, while the decline in construction starts and completions has narrowed; sales are in the off-season, and the decline has widened, but the month-on-month decline in housing prices has continued to narrow slightly, among which Shanghai has continued to rise month-on-month, which may boost market confidence; in terms of financing, the improvement in the implementation of development loans has led to a further narrowing of the decline in funds in place for real estate companies, but the financing coordination mechanism still needs to continue to work hard in the future. Under the demand for "stabilizing real estate", the 517 interest rate cut and storage policy have gradually been implemented at the practical level, which is expected to promote the restoration of confidence in the real estate market and build a bottom as soon as possible, providing valuation repair space for the sector. If the real estate is stable, the economy will be stable, and if the economy is stable, the exchange rate, equity and even consumption will be active.

Source: China Securities

Statement: All information content of Databao does not constitute investment advice. The stock market is risky and investment should be cautious.

Editor: Xie Yilan

Proofreading: Li Lingfeng