RMB “active” appreciation is intended to hedge inflation

Yesterday, the exchange rate of the RMB against the US dollar rose by another 25 basis points, hitting a new high for five consecutive days, and further approaching the mark of 6.39 yuan. Analysts said that the appreciation of the renminbi is constructive in helping to address China's inflationary pressures, and it is expected that the renminbi will continue to appreciate against the US dollar during the year. With the sharp appreciation of the renminbi, the relevant beneficiary stocks have seen significant gains in recent days and there are great opportunities. The appreciation of the renminbi has become more “active”. The China Foreign Exchange Trading Center announced that the central parity of the RMB exchange rate in the inter-bank foreign exchange market yesterday was US$1 to 6.3925, an increase of 25 basis points and a five-liter increase. Different from the past, the appreciation of the renminbi against the US dollar was often due to the continuous depreciation of the US dollar, which led to the passive appreciation of the renminbi. In the near future, the renminbi “actively” chose to appreciate in the context of the dollar’s ​​sideways volatility. Despite the sharp fall in the US dollar on Monday, the yuan rose only 25 basis points against the US dollar on Tuesday, compared with 176 basis points against the US dollar on Thursday, and yesterday's increase was not large. Insiders analyzed that the recent performance of the renminbi against the US dollar has become more and more active, perhaps the central bank intends to use the appreciation of the renminbi to control imported inflation. World Bank President Zoellick said recently that the appreciation of the renminbi is constructive, especially in helping to address China's inflationary pressures. At the same time, he predicted that from the recent inflation data in China, the renminbi may continue to appreciate in order to curb the pressure of rising prices. There is still room for appreciation in the future. This year, the appreciation of the central parity of the RMB against the US dollar has reached nearly 3.5%, exceeding last year's full year. The central bank also clearly stated that the exchange rate instrument is in a prominent position in the report released last week. The continued strength of the RMB against the US dollar is indicating that the exchange rate instrument is gradually moving forward. Under the background of the downgrade of the US rating, the continued low interest rate policy of the Federal Reserve and the unrelenting inflationary pressures in China, many institutions expect that the RMB market may continue to appreciate. Standard Chartered expects the yuan to appreciate by 4% to 5% against the US dollar in the next 12 months; Goldman Sachs released a report on the 15th, expecting the yuan to appreciate by about 6% per year against the US dollar, and it is recommended to continue to short the US dollar against the yuan; Morgan Stanley is in the latest report In the meantime, investors should start selling the US dollar against the RMB 12-month NDF from the 6.2810 level, with the target at 5.95 and the stop-loss order at 6.42. Morgan Stanley expects that China will speed up the tightening policy through exchange rate adjustment. The bank said that China now has more incentives to accelerate the decoupling of the renminbi from the dollar. The appreciation of the beneficiary sector rebounded markedly. While the renminbi accelerated its appreciation, the A-share market also showed a stabilizing rebound. The Shanghai Composite Index rebounded from August 2 to August 16, up from 2,637.68 points to 2,263.36 points, despite shrinking yesterday. Adjustments, but did not undermine the overall rebound trend. It is observed that the recent appreciation of the RMB appreciation sector has rebounded significantly. Statistics show that both the air transport sector and the papermaking sector have significantly higher than the same period. Analysts pointed out that the appreciation of the renminbi is expected to bring benefits to enterprises with higher foreign currency liabilities such as aviation and papermaking or higher imports of raw materials. The aviation industry is a typical foreign exchange liability industry, especially the US dollar debt. The appreciation of the RMB will result in one-time exchange gains. The aviation stocks will come from the exchange income, which accounted for 13%-22% of the pre-tax profit last year. At the same time, due to fuel costs. About 30% of the total cost, airlines will also benefit from the decline in jet fuel import prices and the reduction in rental costs. Zhongyuan Securities believes that every 1% appreciation of the RMB against the US dollar will increase the earnings per share of Air China, China Eastern Airlines, China Southern Airlines and Hainan Airlines by 0.035 yuan, 0.025 yuan, 0.04 yuan and 0.02 yuan respectively. Industrial Securities pointed out that high oil prices have always been a major issue for aviation stocks, and aviation stocks have short-term speculation. It can be seen from this that the opportunities triggered by the appreciation of the renminbi are more structural. Those enterprises that purchase raw materials at a higher cost and have higher foreign currency liabilities will have certain trading opportunities. However, many export-oriented enterprises with high export business will face the dual effects of decreased export competitiveness and insufficient external demand.

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