Continued Depreciation To Combat A Share Market

Although the spot exchange rate rose in February 3rd, there was no sign of the end of the devaluation since the end of last year. In February 2nd, the spot exchange rate of RMB against the US dollar fell below the 6.26 integer pass in early trading, reaching a minimum of 6.2603, a discount rate of 1.984% over the middle price, and only one step away from the 2% limit line. Data show that the RMB to us dollar exchange rate has reached a high level from the end of October 2014, and is accelerating its path of depreciation. This year, the yuan has fallen by 1% against the US dollar, continuing the decline in November last year. Since last November, the yuan has depreciated by 2.4% against the US dollar.

　　 Wen bin It indicated that since the reform, the RMB effective exchange rate of the bank for International Settlements has risen by 50%, and the nominal exchange rate of RMB against the US dollar has risen by 32%. Since 2013, the central bank has begun to use the phrase "achieving equilibrium" frequently in some public statements. "If only from the current account point of view, the proportion of China's current account surplus to GDP has dropped from 10% in 2007 to 2% to 3% at present. According to this level, the level of RMB exchange rate is appropriate. But the change of capital account can not be ignored. Since 2015, China and the US economy will enter a new big cycle. The United States is entering the cycle of gradual economic improvement and increasing interest rates, and China is entering the new economic normal growth rate and the cycle of interest rate reduction. Under this cycle, the attractiveness of RMB assets will decline. He said that the renminbi will be systematically reassessed, and the direction of revaluation is depreciation.

Many industry experts believe that exchange rate In the context of marketization, market forces dominate this round of depreciation, but the central bank will not allow the exchange rate to depreciate. No matter what happens, the central bank will always try to stabilize its expectations through the middle price. "The market and the central bank are looking for a revaluation point. At present, the wait-and-see atmosphere is relatively strong." Wen Bin said.

The report of the strategic planning department of the Agricultural Bank of China indicates that our country has nearly US $4 trillion in foreign exchange reserves. policy Regulatory space and room for maneuver are larger. If the fluctuation of the RMB exchange rate is too large, the central bank's moderate regulation in the critical period can still play an important role in "42 allocation of thousands of pounds" and stabilizing market expectations.

However, investors on the stock market are not so rational. The rapid devaluation of the renminbi has triggered violent turbulence in the capital market. WIND statistics show that during the week from January 26th to January 30th, the Shanghai Composite Index fell continuously, and the 5 trading days dropped 4.22%.

A more serious blow to the A share market is the increase in the uncertainty of the central bank's monetary policy easing. In the past, it was widely expected that the central bank would implement quasi reduction or even cut interest rates in the near future, and the sharp depreciation of the RMB against the US dollar had upset this expectation: the Central Bank of China is becoming more and more in a dilemma in easing the pace of monetary policy. Once the rate is cut sharply, it will accelerate the depreciation of the RMB and accelerate the withdrawal of arbitrage capital.

It is worth noting that capital push is one of the most important factors in the strong rise of the A share market. However, at present, this driving force is facing great uncertainty. At the micro level, the securities and Futures Commission [micro-blog] has announced that it will carry out on-site inspections of the remaining 46 companies' financing businesses in the near future. The CIRC will conduct two inspections of venture capital, and the CBRC will also introduce new regulations to strengthen the supervision of entrusted loans and seize the important source of funds for A businesses. It can be said that at the micro level, the policy orientation of "deleveraging" of regulators is very obvious. In this case, the uncertainty of monetary policy at the macro level is even worse for the A share market.