Exchange Rate Projections - Under the baseline scenario, the USD/CNY exchange rate is expected to approach 7.0 by the end of the year[1] - In an optimistic scenario, with extraordinary counter-cyclical policies, the new equilibrium for USD/CNY could be around 6.7[1] Monetary Policy Implications - A potential interest rate cut of 10-20 basis points (BP) by the People's Bank of China (PBOC) in Q4 may not delay RMB appreciation but could intensify it[1] - The current market does not fully anticipate a rate cut, meaning the existing exchange rate does not factor in this possibility[1] Economic Context - The recent RMB appreciation is not driven by strong economic fundamentals but rather by expectations and a self-fulfilling cycle of currency appreciation[1][10] - The Chinese government's debt cost is currently lower than economic growth rates, supporting fiscal expansion and the exchange rate[1] Investment Insights - RMB appreciation is expected to benefit Chinese stocks, with historical data showing that a 1% appreciation typically leads to a 2.73% increase in A-shares and a 4.52% increase in Hong Kong stocks[6] - The current RMB appreciation cycle has seen A-shares rise by an average of 8.31% and Hong Kong stocks by 10.52% since April 8, 2025[6] Risks and Considerations - Risks include misinterpretation of policy, unexpected monetary policy actions, and potential increases in U.S. tariffs[50]

Group 1 - The Shanghai Composite Index fell by 0.23% as of April 29, 2025, with mixed performance among constituent stocks, led by Weir Shares up 4.58% and Wuxi AppTec up 4.39% [3] - The Politburo meeting highlighted three key signals regarding the economic situation: a recognition of external economic challenges, a focus on stabilizing employment and market expectations, and an acceleration of policy implementation, particularly in technology, consumption, and foreign trade [3] - The government plans to enhance policy measures to support key sectors and ensure employment stability as a primary goal [3] Group 2 - According to Dongwu Securities, the "national team" has shifted its investment strategy from individual stocks to passive index tools, with over 100 billion yuan allocated to ETFs tracking the Shanghai 50 Index by the end of last year [4] - As of March 31, 2025, the top ten weighted stocks in the Shanghai 50 Index accounted for 49.84% of the index, with Kweichow Moutai, China Ping An, and China Merchants Bank being the top three [4] - The Shanghai 50 ETF closely tracks the Shanghai 50 Index, with significant holdings in major blue-chip companies [4]