In the evening, two big news......

UBM Finance

2024-06-26 20:18The official account of Shenzhen Tiantian Say Money Investment Consulting Co., Ltd

Original Liu Xiaobo

In the evening, two important financial news came:

First, the FOB exchange rate of the RMB against the US dollar fell below 7.30, hitting a new low since November last year;

Second, Beijing has finally announced the detailed rules for the implementation of the "517 New Deal for the Property Market", reducing the down payment ratio of the first home loan to 20%, and the down payment ratio of the second home to 35% (within the Fifth Ring Road) and 30% (outside the Fifth Ring Road). In addition, families with two or more children with household registration in Beijing who purchase a second house will be recognized as the first house in the personal housing loan.

In terms of mortgage interest rates, the interest rate of the first home loan in Beijing has been adjusted to not be lower than the loan prime rate (LPR) of the corresponding term minus 45 basis points, and the lower limit of the adjusted mortgage interest rate for more than 5 years is currently 3.5%.

Let's look at the RMB exchange rate first.

The chart above shows the offshore exchange rate of RMB against the US dollar, which is the exchange rate of the Hong Kong market. It has indeed been depreciating slowly lately. Today's CIF price, which is the closing price of the Shanghai national foreign exchange market, is 7.2665, which is about the same.

The chart below is the monthly chart of the FOB price, which is convenient for you to see the medium and long-term trend:

In recent years, the strongest time for the RMB against the US dollar was in December 2021, when the RMB was once 6.3 yuan to 1 US dollar, when the epidemic in Europe and the United States was more serious and the monetary policy was most relaxed

At the beginning of 2022, Europe and the United States gradually broke through the epidemic and began to enter the interest rate hike cycle; China's zero-COVID policy is under downward pressure on the economy, with the renminbi depreciating in 2022 and depreciating to 7.3748 to $1 around October and December, when the pandemic was at its worst.

Why has the renminbi depreciated recently? It is related to the strengthening of the dollar index.

Recently, Canada, the eurozone, and Switzerland have cut interest rates, while the United States has not cut interest rates because inflation has not yet fallen significantly. This has led to a strong performance in the dollar index, which is now approaching 106 points.

The U.S. dollar is appreciating against almost all major currencies. Since the monetary policy cycles of China and Japan diverge more significantly from those of the United States, the renminbi and the yen have recently depreciated slightly more.

The chart below shows the exchange rate between the US dollar and the yen, and the yen has depreciated to 160 yuan to 1 US dollar, which is more than the renminbi.

Another reason for the weakening of the renminbi against the US dollar is that on the surface, China's LPR (loan prime rate, or benchmark interest rate) has not cut interest rates, but the recent targeted interest rate cuts for the property market have been very strong, especially the interest rate on first-home loans has generally been reduced to around 3.15% to 3.25%.

China's real weighted average interest rate is declining, and the interest rate inversion between China and the United States has intensified. This is another reason for the recent weakening of the renminbi exchange rate.

The property market and the stock market have not been able to recover for a long time, which has also allowed some hot money to flow out. For example, Warren Buffett has recently sold BYD again. The outflow of international hot money will also cause depreciation pressure on the renminbi.

It doesn't matter if the exchange rate rises or falls, the key depends on what angle and position you stand on. As an ordinary person, if there is no strong demand for studying, traveling, and shopping abroad, the appropriate depreciation of the RMB is good and can stimulate economic recovery.

The reason why Japan's tourism industry is so hot is related to the continuous depreciation of the yen.

From the perspective of RMB internationalization, a strong exchange rate is conducive to building the confidence of users in other countries. But let's be honest, it is actually painful for the exchange rate to remain strong during the economic downturn.

What everyone is concerned about is how the exchange rate will go in the future, and whether there will be a significant depreciation, such as breaking 7.5 or even 8.

My point is that the exchange rate is an economic issue, but it is also a political issue. Under the financial power of the United States, any country that collides with the United States will have the result of exchange rate depreciation. If the official exchange rate is forcibly maintained, there will inevitably be a black market exchange rate.

For example, after Russia turned against the United States, the exchange rate fluctuated violently for a time, and later stabilized the exchange rate by raising interest rates sharply.

If you look at the chart above, the ruble seems to be relatively stable against the dollar, and it has recently appreciated. The reality is that there is already a black market in Russia, and the chart above is the official exchange rate, which is about 180 rubles to 1 dollar.

In the 1980s, there were even three exchange rates in China: the official exchange rate, the adjustment exchange rate and the black market exchange rate. On January 1, 1994, the three exchange rates were merged through exchange rate reform.

Therefore, the evolution of Sino-US relations has a huge impact on the RMB exchange rate. If China and the United States fight but do not break, it will depend on China's annual foreign exchange surplus. If it can successfully guide expectations, coupled with maintaining a large surplus, the RMB exchange rate is conditioned to remain stable for a long time. On the contrary, it may fluctuate, such as depreciation.

Therefore, the key to how the exchange rate will go is three factors: first, Sino-US relations; second, the expectations of entrepreneurs and wealthy people; Third, the surplus and its size.

From the perspective of purchasing power, the RMB exchange rate is currently undervalued, not overvalued.

Let's look at Beijing's new property market policy.

On May 17, the People's Bank of China and the State Administration of Financial Supervision jointly issued a new policy for the property market, including the cancellation of the lower limit of the interest rate on loans for first and second homes at the national level, and the reduction of the down payment ratio for loans for first and second homes.

In the following 1 to 2 weeks, the 517 New Deal was implemented in various places. Only Beijing delayed the implementation of the new policy until nearly 40 days later, showing that Beijing is cautious and reserved in implementing regulations.

Why be cautious and reserved? Because Beijing has long established the positioning of relieving non-capital functions, the Xiong'an New Area and Tongzhou Sub-center have been established for this purpose. A large number of universities, central enterprises, and wholesale markets have been moved out of Beijing.

In this context, is it possible for Beijing to lift the purchase restrictions in order to save the property market?

My opinion is that it is basically impossible.

Therefore, Beijing's new property market policy can only be a dojo in a snail shell - relax the purchase restrictions internally. The so-called "inside" refers to people who are qualified to buy houses, such as people with household registration in Beijing and outsiders who have paid social security for 5 years.

For the non-hukou population, especially those who do not actually work or live in Beijing, it is unlikely that the purchase restrictions will be relaxed.

Beijing is also the least leveraged among the four major first-tier cities, with only about 68%. Shenzhen and Guangzhou are around 90%, and Shanghai is around 80%.

As of the end of May this year, the balance of household deposits of Beijing residents was 6.83 trillion yuan (2.4 times that of Shenzhen), the balance of loans was 2.52 trillion yuan (79% of Shenzhen), and the per capita net deposits of residents were 197,000 yuan, while the per capita net deposits of Hangzhou and Shenzhen were negative.

Beijingers are relatively wealthy, there are more people who like to buy houses with one-time payment, and the leverage ratio of the property market is relatively low.

My judgment is that even if the property market is very sluggish, the core area of Beijing will not lift the purchase restrictions, and the situation in Shanghai and Shenzhen is similar, but the policy will be more flexible than in Beijing. As for Guangzhou, it is only a matter of time before the purchase restrictions are fully lifted.

Beijing's relaxation of the property market is of course good news. My judgment is that Shanghai, Shenzhen, and Guangzhou are still in the pipeline for a round of relaxation, which may come out at any time as long as the market needs it. For example, it is possible for the non-core area of Shanghai to significantly reduce the threshold for purchase restrictions, and the non-core area of Shenzhen to cancel the purchase restrictions.

But what I want to tell you is: don't think that the canceled purchase restrictions will not "make a comeback". Perhaps in less than 5 years, cities like Guangzhou, Hangzhou, Chengdu, Nanjing, and Wuhan may resume purchase restrictions in the core areas, and the threshold for buying houses in Beijing, Shanghai and Shenzhen will also be significantly increased.

There is no one-size-fits-all policy in the property market, nor does there exist a perfect new model, everything is a cycle.

Just like in recent years, Western countries have tightened immigration policies, this is only a cycle, and after a few years of economic downturn, immigration policies will still be relaxed.

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