Group 1 - The core viewpoint of the article highlights the impact of significant monetary policy changes, particularly the substantial interest rate hikes by the US Federal Reserve from 2021 to 2023, which have influenced various stock markets, including the Korean stock market [3]. - The Korean stock market experienced a nearly 40% decline from its peak in 2021 and has been in a bear market for about two years, with low valuations observed, such as a price-to-earnings (P/E) ratio of around 10-12 times and a price-to-book (P/B) ratio dropping below 1 in August-September 2024 [3]. - Following the onset of a rate-cutting cycle by the Federal Reserve, the Korean stock market emerged from a prolonged bear market, leading to significant price increases in the subsequent year [3][4].

Core Insights - The relationship between the US interest rate hikes and the RMB exchange rate is complex and not straightforward, influenced by various economic factors and international politics [1][4] - The Federal Reserve's decision to raise the federal funds rate acts as a significant shock to global financial markets, particularly affecting countries with close trade ties to China [1][2] Group 1: Impact of US Interest Rate Hikes - When the Federal Reserve raises interest rates, the cost of borrowing in USD increases, prompting investors to reassess their asset allocations [2] - A hypothetical scenario illustrates that if a company issues a $100 billion bond in China, with $50 billion purchased by US investors, the rising borrowing costs could lead to shifts in investment strategies [2] Group 2: RMB Exchange Rate Dynamics - If the RMB appreciates against the USD, Chinese investors may prefer holding USD assets for higher returns; conversely, if the RMB depreciates, they may shift towards RMB assets [4] - The RMB's fluctuations are primarily driven by market supply and demand, influenced by a basket of currencies, and not solely determined by US interest rate changes [4] - The ongoing trade relations between China and the US, particularly in the context of US protectionist policies, can exert pressure on the RMB exchange rate [4] Group 3: Future Outlook for RMB - Despite potential depreciation, the strong economic foundation and growth potential of China provide a basis for RMB appreciation in the future [4] - As China's economy continues to grow steadily and reforms progress, the RMB exchange rate is expected to stabilize at a more reasonable level [4]