高盛-人民幣強(qiáng)勢(shì)外部因素導(dǎo)致 China FXRates Monitor CNY strength driven by external tailwinds09052024

5September2024|8:38AMHKT

ChinaFX/RatesMonitor:CNYstrengthdrivenbyexternaltailwinds

Ourmonitortracksthelatestdevelopmentsandidenti?eskeyindicatorsforChinaFXandrates,includingvaluations/policystance,technicals,?ows,andfundamentals.

BelowwesummarizeourkeytakeawaysontheChinaFXandratesmarket.

nRisingdownsiderisktoeconomicgrowth.Julyof?cialdataandAugusthigh-frequencytrackingweregenerallysoft.Althoughexportsandrelated

manufacturingactivitiesremainedsolid,retailsalesandpropertyactivitydeclinedsequentially.CoreCPIin?ationedgeddowninJuly,suggestingsluggish

domesticdemand.Creditgrowthcontinuedtosurprisetothedownside,andthenegativecreditimpulseislikelytobecomeastronggrowthheadwindinthe

absenceofsequentialaccelerationincreditgrowth.Webelievedemand-side

easingmeasuresholdthekeytoChina’sgrowthoutlook.More?scaleasing,

alongwithcontinuedmonetarypolicyeasing,isnecessarytoensureeconomicgrowthstayscloseto5%yoy.Weexpecttheauthoritiestoaccelerate

governmentbondissuanceandproceedsspending(Augustgovernmentbond

netissuancereachedanall-timehigh;Exhibit29),andthePBOCtodeliverone25bpRRRcutinSeptemberandone10bppolicyratecutinQ4.Forpoliciesthatcanboostdemandandliftcon?dence,wethinkthereisstilllow-hangingfruit,

suchascuttinginterestratesonexistingmortgages.

nCNY:fearsofcatchingafallingknife.USD/CNYspothasmovedlowerto

around7.10overthepasttwoweeksonasofterDollar.Investorshavebeen

increasinglyconcernedaboutfurtherCNYappreciationagainstUSD,especially

forpotentialUSDsellingbyChineseexporters.WethinktherecentCNY

_

appreciationagainstUSDismostlydrivenbyexternalfactors,especiallybythe

changesofmarketpricingforFedratecuts(fastercuts)andUSelection(HarrisleadsTrumpinnationalpolling).ThePBOCdoesnotseemtosupportafurther

CNYrally,asUSD/CNYcounter-cyclicalfactorturnedpositiveandfront-endCNHliquidityeasedmaterially.ThehighervolatilityofUSD/CNYinthenearterm

re?ectsgreateruncertaintyaroundFedviewsandtheUSelection,whichmay

discourageCNYshortsdespitethestill-elevatedcarryreturn.Intheshortterm,weacknowledgecarryunwindsandpotentialUSDsellingbyexporters,ifany,

couldleadtoanovershootinCNYstrength.ButweexpectCNYtounderperformcurrenciesofmajortradingpartnersoverthemediumterm,duetoweak

fundamentalsandstill-downbeatsentimentinChina(seeourtraderecommendationonshortCNYagainstCFETSbasket).

nThestartof“reverseoperationtwist”.Long-termbondyields,suchas10y/30y

XinquanChen

+852-2978-2418|

xinquan.chen@

GoldmanSachs(Asia)L.L.C.

DannySuwanapruti

+65-6889-1987|

danny.suwanapruti@

GoldmanSachs(Singapore)Pte

HuiShan

+852-2978-6634|hui.shan@GoldmanSachs(Asia)L.L.C.

LishengWang

+852-3966-4004|

lisheng.wang@

GoldmanSachs(Asia)L.L.C.

YutingYang

+852-2978-7283|

yuting.y.yang@

GoldmanSachs(Asia)L.L.C.

AndrewTilton

+852-2978-1802|andrew.tilton@GoldmanSachs(Asia)L.L.C.

Investorsshouldconsiderthisreportasonlyasinglefactorinmakingtheirinvestmentdecision.ForRegAC

certi?cationandotherimportantdisclosures,seetheDisclosureAppendix,orgoto/research/hedge.html.

GoldmanSachsChinaFX/RatesMonitor

CGB,movedsidewaysinAugust,onthebackofreportedlyincreasedsecondary

marketinterventionbythePBOC.Short-termbondyieldsdriftedhigherinAugust

amidacceleratedgovernmentbondissuanceandtightenedfront-endliquidity.The

MOFissuedaroundRMB1trillionCGBoverthepastmonth.FX-hedgedbondyieldsdroppedagainstUSTreasuryyields,duetotheriseofFXforwardpoints(Exhibit16).RecentpolicystatementssignaledPBOC’sconcernoverSiliconValleyBanktype

mark-to-marketrisksinChinesebanks’bondportfolios(seeourtakeawayson

PBOC’spushbackagainstthebondrallyfordetails).Thecentralbankalsoannounced

thestartofChinesestyle“yieldcurvecontrol”:theyboughtshort-termCGBand

soldlong-datedCGB,whichresultedinanetpurchaseofRMB100bninAugust.Theeffortstoseta?oorforlong-termCGByieldsappeartobeeffectivefornow,but

weakdomesticdemandandpoorsentimentmaydriveyieldslowerinthemediumterm,asthePBOCwouldneedtocontinuemonetaryeasingtosupporteconomicgrowth,inourview.Wecautionpotentialupsideriskstobondyieldsontighter

fundingconditionsfromacceleratedgovernmentbondissuanceinthecomingmonths.

_

5September20242

GoldmanSachsChinaFX/RatesMonitor

ForeignExchange

1.Valuationsandpolicystance

Exhibit1:CNYappreciatedagainstUSDinAugust,butdepreciatedsomewhatagainstCFETSbasket

Exhibit2:USD/CNHspotdriftedlowerinAugustamidweakerUSD

USDCNY

Index;end-2014=100110

5.8

108

106

104

102

StrongerCNY

CNYvs.CFETSbasket

6.0

USD/CNY(rightaxis,reversescale)

6.2

6.4

100

6.6

98

96

94

6.8

7.0

92

7.2

90

887.4

201620172018201920202021202220232024*UsingexpandedCFETSbasketstartingfrom2017

Index

108

107

106

USD/CNH7.40

7.35

7.307.25

105

104

7.207.15

103

102

101

100

DXY

USD/CNH(rightscale)

7.107.05

7.006.95

Sep-23Nov-23Jan-24Mar-24May-24Jul-24Sep-24

Source:Bloomberg,Wind

DXY:USDollarIndex,whichmeasuresthevalueoftheUSDollarvs.abasketofcurrencies.

Source:Bloomberg

Exhibit3:USD/CNYcounter-cyclicalfactorturnedpositiveinlateAugustfor?rsttimeinmorethanayear

Exhibit4:USD/CNHTom/NextpointsremainedlowinAugust,suggestingeasedfront-endCNHliquidity

Pips

300

0

-300

-600

-900

-1200

-1500

-1800

Strengtheningbias

CountercyclicalfactorinUSD/CNYfixing

Singleday

5daysmovingaverage

Pips

300

0

-300

-600

-900

-1200

-1500

-1800

_

Jan-18Jan-19Jan-20Jan-21Jan-22Jan-23Jan-24

PipsPips

3030

20USD/CNHTom/NextpointsTighterCNH20

liquidity

1010

00

-10-10

-20-20

-30-30

Singleday

-40-40

-505dma-50

-60-60

Jan-23Apr-23Jul-23Oct-23Jan-24Apr-24Jul-24

Wemeasurethecountercyclicalfactorbycalculatingthedifferencebetweentheof?cialdaily

CNY?xingandourestimationofthe?xingbasedonof?cialdocumentsofCNY?xingmechanism.

Source:Bloomberg,DatacompiledbyGoldmanSachsGlobalInvestmentResearch

Tom/Next(Tomorrownext)isashort-termFXswapallowinginvestorstorollovertheirspot

position.Positive(negative)Tom/Nextpointsmeannegative(positive)carryreturnsoflongUSDshortCNH.Redcirclesindicatethetimingoffront-endCNHliqudityshortage(potentialCNH

liquiditymanagementbytheauthorities).

Source:Bloomberg,DatacompiledbyGoldmanSachsGlobalInvestmentResearch

5September20243

GoldmanSachsChinaFX/RatesMonitor

2.Technicals

Exhibit5:Carry-to-volratioforUSD/CNHfellsomewhatonrisingvolatilityinAugust,butremainedhigh

Ratio1.2

0.9

0.6

0.3

0.0

-0.3

-0.6

-0.9

-1.2

Ratio1.2

Carry-to-volratio(USD/CNH)

0.9

0.6

0.3

0.0

-0.3

-0.6

-0.9

-1.2

192021222324

Ratio

1.2

0.9

0.6

0.3

0.0

-0.3

-0.6

-0.9

-1.2

Ratio1.2

Carry-to-volratio(EUR/CNH)

0.9

0.6

0.3

0.0

-0.3

-0.6

-0.9

-1.2

192021222324

Carryisde?nedasannualizedcarryreturnsof3mUSD/CNH/EUR/CNHforward,andvolatilityrefersto3-monthrollingrealizedvolatilityofFXtotalreturns.Source:Bloomberg,GoldmanSachsGlobalInvestmentResearch

Exhibit6:Short-termmomentumtosellCNHandbuyUSDweakenednotablyinAugust

Ratio

10

8

6

4

2

0

-2

-4

-6

-8

-10

Ratio

10

Momentum-to-volratio(USD/CNH)

8

6

ShortCNH

4

2

0

-2

-4

-6

-8

-10

161718192021222324

Ratio108

6

4

2

0

-2-4-6-8-10

Ratio

10

Momentum-to-volratio(EUR/CNH)

8

6

ShortCNH

4

2

0

-2

-4

-6

-8

-10

161718192021222324

Momentumisde?nedas3-monthcumulativeFXtotalreturns,andvolatilityrefersto3-monthrollingrealizedvolatilityofFXtotalreturns.Source:Bloomberg,GoldmanSachsGlobalInvestmentResearch

Exhibit7:CNH/CNYbasisdroppedtoaroundzeroinAugustExhibit8:Cross-currencyswapratefellagainstNDIRSratein

AugustasCNHfundingconditionseased

_

PipsPips

16001600

14001400

CNH/CNYbasis:1m

12001200

CNH/CNYbasis:3m

10001000

800800

600600

400400

200200

00

-200-200Jan-22May-22Sep-22Jan-23May-23Sep-23Jan-24May-24Sep-24

Percent2.5

Percent4.5

CNHFXimpliedyield:3m

4.0

2.0

NDIRS/CCSspread:1y(rightaxis)

3.5

1.5

3.0

1.0

2.5

0.5

2.0

0.0

1.5

-0.5

1.0

Jan-22May-22Sep-22Jan-23May-23Sep-23Jan-24May-24Sep-24

CNH/CNYbasisisde?nedasthedifferencebetweendeliverableforwardofUSD/CNHandnon-deliverableforwardofUSD/CNY.

Source:Bloomberg,GoldmanSachsGlobalInvestmentResearch

NDIRS/CCSspread:CNHcross-currencyswaprateminusCNYnon-deliverableinterestrateswaprate.

Source:Bloomberg,GoldmanSachsGlobalInvestmentResearch

5September20244

GoldmanSachsChinaFX/RatesMonitor

3.Flows

Exhibit9:FXconversionratioforgoodstradebalancefellinJulyExhibit10:Foreigninvestorscontinuedtoincreasetheirholdingsof

RMBbondsinJuly

Percent,6mmaPercent,6mma

120120

FXconversionratiorelatedtogoodstradebalance

(theratioof"FXinflowsrelatedtogoodstrade"to"goodstradebalance")

100

100

80

80

60

60

40

40

20

20

0

0

Julysingle-monthratio:6%

1718192021222324

USDbnUSDbn

4040

CapitalflowstoChina'sbondandequitymarkets

3030

20Netinflows20

1010

00

-10-10

-20BondEquity-20

Bond+Equity

-30-30

-40-40

2015201620172018201920202021202220232024

Thelinestandsforasix-monthmovingaverageofFXconversionratio.Source:CEIC,GoldmanSachsGlobalInvestmentResearch

4.Fundamentals

Exhibit11:China’stradebalanceroseinJulyonhighergoodstradesurplus

Source:PBOC,Wind,SSE,SZSE,HKEX,DatacompiledbyGoldmanSachsGlobalInvestmentResearch

Exhibit12:China’stravelexportsroseto115%of2019averagelevelasofJuly2024,andtravelimportsincreasedtoaround108%of2019levels

USDbn,sa

80

60

40

20

0

-20

-40

Tradebalance

Goodstradebalance

Servicestradebalance:travel

Servicestradebalance:non-travelTotal

USDbn,sa

80

60

40

20

0

-20

-40

192021222324

%of2019avglevel,sa200

Servicestradebalance:travel

160

120

80

40

%of2019avglevel,sa200

160

ExportsImports

120

80

40

00

161718192021222324

_

Source:HaverAnalytics,GoldmanSachsGlobalInvestmentResearch

Travelimportsarede?nedastheoverseasspendingofChina’sresidentsfortourism,educationandmedicalservices;travelexportsarede?nedasnon-residents’spendinginChina.Both

includetourismspending.

Source:HaverAnalytics,GoldmanSachsGlobalInvestmentResearch

5September20245

GoldmanSachsChinaFX/RatesMonitor

Rates

1.Levelsandtermstructure

Exhibit13:Long-termcashbondyieldsandNDIRSratemovedsidewaysinAugust

Exhibit14:Short-termratesdriftedhigherinAugust,likelyduetolargeamountofgovernmentbondissuance

Percent

3.2

3.0

2.8

2.6

2.4

2.2

2.0

1.8

1.6

Percent3.2

3.0

2.8

2.6

2.4

2.2

CGB:30y

CDB:10y

2.0

MLF:1y

CGB:10y

1.8

NDIRS:5y

1.6

Jun-23Aug-23Oct-23Dec-23Feb-24Apr-24Jun-24Aug-24

%3.0

2.8

2.6

2.4

2.22.0

1.8

1.6

1.41.2

%3.0

2.8

2.6

2.4

2.22.0

1.8

IRS:1y

MLF:1y

NCD:AAA:1y

1.6

CGB:1y

1.41.2

Jun-23Aug-23Oct-23Dec-23Feb-24Apr-24Jun-24Aug-24

Source:CEIC,GoldmanSachsGlobalInvestmentResearchSource:Wind

Exhibit15:NDIRScurvecontinuedto?atteninAugust,whileCGB2s10sslope?attenedbeforesteepeninginlateAugustoneasedfront-endliquidity

Exhibit16:FXhedgedyieldsofshort-termbondsdroppednotablyagainstUSTyieldsinAugust

BasisPoints

80

70

60

50

40

30

20

10

BasisPoints

80

NDIRS:1s5s

CDB:2s10s

CGB:2s10s

70

CGB:10s30s

60

50

40

30

20

10

00

Jun-23Aug-23Oct-23Dec-23Feb-24Apr-24Jun-24Aug-24

_

Source:Wind,GoldmanSachsGlobalInvestmentResearch

PercentPercent

2.02.0

FXhedgedyieldsoverUSTreasuryyields

1.5CGB:1y1.5

CDB:1y

1.0NCD:12mAAA1.0

0.50.5

0.00.0

-0.5-0.5

-1.0-1.0

192021222324

CGB:Centralgovernmentbonds,CDBbond:bondsissuedbyChinaDevelopmentBank,NCD:Negotiablecerti?catesofdeposit.

Source:Bloomberg,Wind,GoldmanSachsGlobalInvestmentResearch

5September20246

GoldmanSachsChinaFX/RatesMonitor

2.Technicals

Exhibit17:Short-termmomentumtoreceiveCNYNDIRSdeclinednotablyinAugust

Exhibit18:SwapspreadfellinAugustasCGByieldsroseonlargeamountofbondissuance

Ratio

6

Momentum-to-volratioof5yCNYNDIRSbydifferentrollingwindows

4

2

0

-2

-4

-6

1617181920

Receiving

3m1y

21222324

Ratio

6

4

2

0

-2

-4

-6

bps

60

bps60

10-daymovingaverageof:

40

Swapspread:1y40

Swapspread:2y

20

Swapspread:5y20

0

0

-20

-20

-40

-40

192021222324

Momentumisde?nedasannualizedrollingspotreturnsforaperiod,andvolatilityreferstorealizedvolatilityofspotreturnsforaperiod.

Source:Bloomberg,GoldmanSachsGlobalInvestmentResearch

3.Fundamentals

Exhibit19:1-yearaheadconsensusforecastofChinarealGDPgrowthandCPIin?ationedgeddowninAugust

Swapspread:onshoreIRSratesminusCGByields.

Source:Wind,GoldmanSachsGlobalInvestmentResearch

Exhibit20:BilldiscountratecontinuedtodeclineinAugust,suggestingweakloandemand

%

9

8

7

6

5

4

3

2

19

1

202122

-yearaheadconsensusforecastRealGDPgrowth

CPIinflation(rightaxis)

2324

%4.0

3.5

3.0

2.5

2.0

1.5

1.0

0.5

Percent,10-daymovingavgPercent,10-daymovingavg

4.54.5

4.04.0

3.53.5

3.03.0

2.52.5

2.02.0

1.51.5

1.0Billinterbankdiscountrate:6m1.0

0.5Billdirectdiscountrate:6m0.5

0.00.0

192021222324

_

Source:ConsensusEconomics,GoldmanSachsGlobalInvestmentResearch

BillinterbankdiscountratesdiscontinuedsinceJune2022.Asinterbankdiscountratesco-movewithdirectdiscountratesclosely,weusedirectdiscountrateasaproxythereafter.

Source:Wind,GoldmanSachsGlobalInvestmentResearch

5September20247

GoldmanSachs