The Signal Of "Maintaining Stability And Resisting Risks" Looms

After the 930 policy of the Central Bank, we pointed out that monetary easing began to increase. On January 16, in "What does the Central Bank Mother want when the wind blows", we pointed out that the Central Bank "first supervises and then relaxes, and the New Year to the two sessions is a sensitive period for relaxation". However, after the second interest rate cut recently by the People's Bank of China, the statements made by two technical officials may indicate that monetary policy is entering a new stage. Specifically:

1) On February 28, Director Guan Tao of SAFE wrote an article comparing the current situation with the Asian financial crisis;

2) On March 4, President Yi Gang said that "the exchange rate can remain basically stable, and there is no urgent need to adjust the floating range of RMB";

From the above signals, the monetary authority has begun to be concerned about the depreciation pressure on the current RMB market. From this perspective, the central bank may be entering the "risk response mode" with "risk prevention" as the core.

　　 Stability is the first step to prevent risks exchange rate 。

President Yi's statement obviously made some foreign capital The expectation of "opening the exchange rate fluctuation range" held by the institution failed. Since the current spot exchange rate of RMB has been set on the limit board, if the intraday trading range is not opened, it is obvious that the spot exchange rate can only follow the middle price. If the middle price is not moved, the spot exchange rate of RMB against the US dollar has a depreciation space of 0 and an appreciation space of+4%. Based on President Yi Gang's statement, we emphasize again that the risk of continuing to short RMB is far greater than the potential benefits. Under the background that Yang Ma has a lot of chips, it is obviously unwise to continue to short the RMB against her.

　　 Risk prevention and economic stability require monetary easing.

Interestingly, after two interest rate cuts, one comprehensive RRR reduction, and several open market operations, President Pan Gongsheng mentioned in an interview today that "the real estate financial policy is constantly being evaluated". As we stated in the article "On Real Estate - the Big Turning Point of Policy Orientation" the day before yesterday, the focus of the government's real estate policy has shifted to "stabilizing prices". In addition, in the context of abundant aggregate supply, financial support for real estate demand is one of the necessary conditions for "stabilizing real estate prices". From the perspective of "preventing hard landing and panic capital withdrawal", the relaxation of monetary policy (especially for real estate demand) should only be a matter of time.

　　 Why "stable exchange rate+loose exchange rate" currency ”Can it be done?

Some people always use Mundell's ternary paradox to question how the People's Bank of China can "stabilize the exchange rate" while "loosening the currency". In fact, it is very simple:

First, because China's cross-border capital is not 100% free flow, it will not violate the ternary paradox itself;

Secondly, it is true that domestic and overseas interest rate differentials have an impact on the exchange rate, but the question is whether the interest rate is long-term or short-term? If the short-term monetary easing leads to the improvement of medium and long-term growth prospects and the rise of long-term interest rate expectations, can it also support the RMB exchange rate?

　　 There are signs of reversal in the foreign exchange market

Recently, the yield of RMB financial bonds in the offshore market has fallen after a sharp rise, although there are some factors brought about by the decline of risk-free interest rates. But generally speaking, we more understand that the risk premium of RMB assets has begun to decline. We emphasize again that in 2015, the probability and potential scale of capital inflow will be greater than that of outflow. To sum up, the devaluation of the RMB is starting to worry Yang Ma, so don't get involved with her.