RMB Devaluation Difficult To Continue Asset Allocation Is At That Time

There are many divergent opinions about the reasons for the rapid depreciation of RMB in the short term. The explanation given by the market is very diverse, including the overseas shopping and tourism craze of mainland residents during the Spring Festival and the profits of multinational corporations to foreign exchange in P.

However, we believe that although the two explanations are reasonable, they can not completely cover the exchange rate of the RMB exchange rate.

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< p > strong > RMB exchange rate and foreign currency < a href= "http://www.91se91.com/news/index_f.asp" > liabilities < /a > highly correlated < /strong > /p >

< p > first, in the past, the Chinese residents' overseas tourism boom similar to the Spring Festival did not result in a significant devaluation of the RMB. What's more, the devaluation of the renminbi only accelerated after the holiday.

Secondly, China still insists on strict capital flow restrictions under capital terms, and multinational companies can not undertake large-scale capital pfer. Therefore, we must find other main reasons.

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< p > under the condition of relatively tight financing environment in China, the prospect of RMB appreciation is highly correlated with the enthusiasm of enterprises for foreign currency liabilities.

That is to say, when the financing ability of domestic enterprises is depressed by tight monetary policy, enterprises will turn to foreign currency loans, and enterprises' expectation of continued appreciation of the RMB and reducing financing costs is an important determinant.

In the current situation, the domestic situation is suitable for our conclusion.

Highly leveraged industries are the main force of US dollar financing. What is the reason why companies are most keen on foreign currency financing? We can see from two microscopic phenomena.

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< p > first, after the Chinese real estate enterprises won the title of the global dollar bond issue in 2013, as of the beginning of February this year, Chinese real estate enterprises issued a total of $7 billion 900 million of bonds in the global market, ranking the first in the world again, accounting for 38% of the global real estate issuance scale.

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< p > it is obvious that at present, the financing of domestic real estate enterprises has been limited by quota control, especially when a commercial bank suspends the sandwich financing for the real estate industry.

Compared with domestic financing, overseas bond issuance has a higher threshold in terms of legal compliance and channels, but its capital cost advantage is also obvious.

On the one hand, the financing cost of the offshore market, including China's Hongkong and Singapore, is still lower than the domestic level, basically maintained at the level of 5% to 10%. On the other hand, the strong prospect of RMB's "rising interest rate" can also offset a considerable part of the financing cost.

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< p > secondly, we observed that China's port iron ore inventories have been innovating in recent years.

In February 21st, it has climbed to the highest point in history, which is contrary to the current boom in the domestic steel industry. We suspect that the past "copper financing" financing mode has been copied to iron ore.

The important reason for the popularity of similar financing mode is also that the financing enterprises have great expectations for the prospect of RMB appreciation. Once the RMB depreciates, such a mode may seriously aggravate the financial cost of the steel industry.

The above two industries belong to the typical highly leveraged industries. Under the circumstances of limited financing and rising capital costs, foreign financing, which relies on the premise of RMB appreciation, has become the best choice. Its financing operation modes represent two kinds of operation methods, namely, "Ming Ming Bu Dao" and "hidden".

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< p > < strong > > a href= "http://www.91se91.com/news/index_f.asp > > arbitrage fund < /a > inflow aggravate excess liquidity < /strong > /p >

< p > since the Spring Festival, the liquidity of domestic capital market has shown a rare loose situation.

On the one hand, we benefit from the Postbank capital repatriation of the banking system. On the other hand, we believe that the inflow of foreign exchange is expected to be the most important reason for RMB appreciation.

As we have stated in the past report, the renminbi has already shown the potential of a safe haven currency by virtue of higher domestic interest rates and a strong appreciation of the renminbi, but the inflow of arbitrage capital attracted by it is a side effect that the central bank would not like to see.

Therefore, we believe that the central bank intends to guide the RMB's phased devaluation and break the one-way expectation that the arbitrage fund will only lift or not depreciate the renminbi, which is also the specific implementation of the "two-way fluctuation of guiding exchange rate".

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< p > < strong > a href= < http://www.91se91.com/news/index_f.asp > short term depreciation > /a > warning arbitrage paction and one-way expectation < /strong > /p >

< p > although we continue to insist on the earlier view that the potential of the renminbi's hedge currency may help the renminbi to resist the impact of the Fed's reduction of QE, if the risk factors in China are expanding and expanding, the market expectation change will be swift and inevitable.

Once such a situation occurs, the risk of RMB depreciation will seriously aggravate the financial cost burden of enterprises.

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< p > we believe that at present, the risk events that trigger the market's reversal of the RMB expectation will mainly focus on the credit risk of "shadow banks" represented by trust.

Considering that the period from March to June will be the expiration of some high-risk trust projects in China, we believe that at present, the central bank acquiesce in the depreciation of the RMB should be doing a partial warning and stress test. On the one hand, it wake-up alarm for the main body who is overly optimistic about the appreciation of RMB. On the other hand, it also makes a stress test on the impact of RMB appreciation on the financial cost of domestic financing entities.

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After P, we observed that the price of domestic funds descended all the way.

According to past rules, it is one of the reasons for post retirement liquidity to return to the banking system, but we think the more important reason is the massive inflow of foreign exchange and the release of RMB by the central bank in the foreign exchange market.

So we observed that after the Spring Festival, the central bank restarted the repurchase to hedge foreign exchange and sell the renminbi.

That is to say, the central bank recently released Renminbi in the open market and released RMB in the foreign exchange market, which achieved the short-term adjustment of the RMB exchange rate without adding new liquidity, so the ultimate goal of the central bank is to realize the no cost adjustment of the exchange rate.

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< p > strong > Where will the bottom line of the central bank be? < /strong > /p >

< p > we believe that since the devaluation is a warning and stress test of the central bank, the central bank's short-term tolerance range for RMB will not exceed 1% of the bottom line.

We expect that the pressure of RMB depreciation will continue, but if the risk events in China lead to excessive devaluation of the RMB or the central bank believes that the market sentiment is volatile, the central bank is likely to backhand in maintaining the stability of the RMB exchange rate.

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< p > < strong > bond market will usher in a rare opportunity < /strong > /p >

While the central bank will buy the US dollar in the foreign exchange market, it will surely put the underlying currency. But because of the lack of data, we do not know whether the central bank's repurchase in the domestic open market has been completely hedged. P

But we believe that from the recent downward trend of capital prices, the operation of the central bank is not enough to hedge against the recent surge in foreign exchange. Therefore, under the premise that the Central Bank continues to fluctuate in the commitment range of the RMB exchange rate, we still adhere to the previous view that the currency's hedging monetary characteristics will continue to attract capital inflows.

The easing of liquidity will continue. This will create a good foundation for the bull market in the first quarter of the year.

So in terms of large scale configuration, we suggest that fixed income products will be the opportunities in the next two or three months.

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