The impact of RMB depreciation on the stock market: (negative aspects)

1. Impact on domestic asset prices. The depreciation of the RMB will impact domestic asset prices, leading to the weakening of relevant weighted sectors such as finance and real estate, dragging down the overall market.

2. Domestic interest rates are facing passive rise. The RMB exchange rate formation mechanism is moving towards "marketization", which will lead to the gradual establishment of parity between domestic and foreign interest rates. With interest rates in the United States and Europe and other countries rising, China's domestic interest rates are also facing the risk of passive rise, and the prices of domestic stock markets, bonds and other assets are facing serious challenges. estimate.

3. Liquidity shrinks. Against the background of the Federal Reserve raising interest rates, once expectations for RMB depreciation are formed, hot money will flow out and domestic liquidity will shrink, which is not conducive to the strength of A-shares.

The impact of RMB depreciation on the stock market: (positive aspects)

1. It is conducive to economic recovery. RMB depreciation eases the pressure on exports and is the least costly way to stabilize growth. Exports from January to July were -0.8% year-on-year. Although global trade volume has shrunk, it will not cause China's exports to shrink so much. The depreciation of the RMB exchange rate will help reduce the pressure on exports and help the recovery of the economy. The real economy will gradually improve in the third quarter, supporting the stock market.

2. The risk of domestic deflation may be alleviated. The depreciation of the RMB reduces imports of commodities and other commodities, which is generally negative for commodities. However, if international inflation tends to increase in the second half of the year, the risk of domestic deflation may also be alleviated through the channel of imported inflation.

3. Promote the flow of residents’ assets to the stock market. With the RMB depreciating moderately and domestic interest rates tending to fall, bank savings and real estate investment will become less attractive. "Reviving A-shares" will attract funds to flow from banks and the property market to the stock market.

4. The central bank may cut reserve requirements across the board. Wang Yang, a foreign exchange researcher at Guotai Junan Futures Company, expressed his views on the depreciation of the renminbi today. Capital outflows have coincided with the depreciation of the renminbi, the domestic base currency hematopoietic mechanism has failed, and the central bank is about to lower its reserve requirements across the board.