Investment Rating - The report maintains a tactical high cash allocation, with the US dollar as the preferred hedging tool against geopolitical and global risks [1][2] Core Insights - Credit assets exhibit significant negative convexity, suggesting a reduction in credit exposure through credit default swaps (CDS) or shorting high-yield bond ETFs like HYG for linear hedging [1][2] - Right-tail risk hedging is recommended through 1-2 year long call options on indices like S&P and Nikkei, utilizing low volatility tools to mitigate time decay and roll-over risks [1][2] - High energy prices are weakening the current account surpluses of Asian energy-importing countries, necessitating foreign exchange hedging focused on the euro, offshore RMB, and the depreciation risk of Asian currencies [1][2] - Gold's recent rise is attributed to speculative behavior, and it has shown weakness under liquidation pressure; the Swiss franc is more suitable for hedging European-specific inflation or extreme risks [1][2] Summary by Sections Tactical Adjustments - The current environment is characterized by rising implied volatility and increased hedging costs, necessitating structural hedging in investment portfolios to address negative supply shocks [2][3] - Defensive adjustments have been made, maintaining a high cash allocation, with a focus on hedging both left-tail and right-tail risks [2][3] Credit Market Analysis - Credit spreads are viewed as a direct indicator of risk premium, with significant re-pricing occurring due to geopolitical tensions and concerns over private credit and AI disruptions [2][3] - The report emphasizes reducing government bond hedges and credit exposure, particularly through CDS or high-yield corporate bond ETFs [2][3] Interest Rate Outlook - The report suggests a relatively optimistic view on duration, as higher real rates and restrictive policy rates support a bullish stance on rates, especially in the context of potential economic growth impacts [4][5] - Long-term interest rate futures are expected to create downward space, particularly for 10-year and 5-year rates, as the market adjusts to ongoing inflation concerns [4][5] Currency and Commodity Insights - The report ranks different safe-haven assets, highlighting the US dollar as the primary hedging tool against geopolitical and global risks, while the yen and Swiss franc serve specific roles under different economic conditions [4][5] - High energy prices are expected to alter previous expectations for Asian currencies, with a focus on potential rebounds in commodity-exporting countries [5][6] Credit Market Risks - The credit market faces technical risks due to ongoing capital outflows, which could lead to forced selling of bonds and significant negative convexity in credit assets [6] - The report suggests that credit should be viewed as a hedging tool, particularly for equity, interest rate, and foreign exchange investors, with a preference for European over US hedging tools [6]

Group 1: Major Asset Classes & Overseas Events & Data - The three major US stock indices collectively declined, with the S&P 500 down by 0.4%. Meanwhile, gold and silver prices saw a significant increase, with COMEX gold rising by 4.1% to $5280.0 per ounce and COMEX silver up by 11.1% to $93.8 per ounce [2][86] - The US 10-year Treasury yield decreased by 11 basis points, while the dollar index fell by 0.1% to 97.64. The offshore RMB appreciated to 6.86 [2][86] - Brent crude oil prices increased by 1.0% to $72.5 per barrel, reflecting a broader trend of rising commodity prices [30][34] Group 2: Economic Indicators - The US Producer Price Index (PPI) for January was stronger than expected, with a year-on-year increase of 2.9% and a month-on-month rise of 0.5%. This suggests upward pressure on the Personal Consumption Expenditures (PCE) inflation [56][86] - Japan's retail sales for January also exceeded expectations, with a month-on-month increase of 4.1% and a year-on-year rise of 1.8%, driven by strong sales in machinery and vehicles [58][86] Group 3: Labor Market Data - Initial jobless claims in the US for the week ending February 21 were 212,000, lower than the market expectation of 216,000. Continuing claims also fell below expectations, indicating a stable labor market [61][64]

Exchange Rate Dynamics - The RMB exchange rate strengthened significantly post-Spring Festival, with an average daily increase reaching 239 basis points, breaking key psychological levels of 6.85 and 6.80[1] - The surge in demand for currency settlement due to the misalignment of the Spring Festival led to a concentrated demand explosion in late February[1] - Approximately $1 trillion of export earnings have been held in overseas accounts over the past 2-3 years, triggering a "herd effect" in currency settlement as the RMB appreciated rapidly[1] Market Trends - From February 21 to February 28, the CSI 300 index rose by 1.08%, while the Hang Seng Index increased by 0.83%, and the S&P 500 fell by 0.45%[2] - The offshore RMB appreciated by 0.53%, and the US dollar index decreased by 0.11% during the same period[2] - Major commodities saw price increases, with WTI crude oil rising by 0.82%, LME copper up by 5.41%, and London silver increasing by 11.77%[2] Inventory and Fund Behavior - Recent oil inventory levels reached 44,684 million tons, up by 46,224 million tons from the previous week[3] - The latest week saw a decrease in long positions for the US dollar by 2,121 contracts, totaling 13,295 contracts, while short positions slightly decreased by 4 contracts[3] - The scale of gold ETFs increased to 3,540 million ounces, up by 720,000 ounces from the previous week[3] Risk Factors - Potential risks include volatility in overseas markets and uncertainties in domestic policy execution[4]

Group 1 - The offshore RMB to USD exchange rate experienced a sharp decline, falling below the 6.85 mark, which has attracted significant market attention [1] - As of the latest data, the USD/CNH exchange rate opened at 6.84445, with a previous close of 6.84435, reflecting a slight increase of 0.10% [2] - The highest exchange rate recorded this year was 6.85355, indicating a year-to-date decrease of 1.78% [2] Group 2 - In response to the current foreign exchange market conditions, the People's Bank of China (PBOC) announced measures to support enterprises in managing exchange rate risks, including a reduction of the foreign exchange risk reserve ratio for forward sales from 20% to 0% effective March 2, 2026 [2] - The PBOC will continue to guide financial institutions in optimizing services for enterprises' exchange rate hedging, aiming to maintain the RMB exchange rate at a reasonable and balanced level [2]

Market Performance - The three major U.S. stock indices closed mixed, with the Dow Jones up 0.03% at 49,499.2 points, the S&P 500 down 0.54% at 6,908.86 points, and the Nasdaq down 1.18% at 22,878.38 points [1] - Major tech stocks mostly declined, with Nvidia dropping over 5%, marking its largest single-day decline since April 16 of last year; Intel fell over 3%, Tesla over 2%, Google and Amazon over 1%, while Apple saw a slight decrease; Netflix rose over 2%, and Microsoft and Meta had slight increases [1] - Popular Chinese concept stocks mostly fell, with Semiconductors down over 16%, BeiGene down over 8%, Global Data down over 7%, Miniso down nearly 6%, Baidu down over 5%, and Beike down over 5%; on the upside, DaJian Cloud Warehouse rose over 33%, Yuchai International up over 6%, Hilltop Metal Mining up over 4%, and Pony.ai up over 4% [1] European Market - All three major European stock indices closed higher, with Germany's DAX index up 0.45% at 25,289.02 points, France's CAC40 index up 0.72% at 8,620.93 points, and the UK's FTSE 100 index up 0.37% at 10,846.7 points [1] Commodity Markets - International precious metal futures generally fell, with COMEX gold futures down 0.47% at $5,201.50 per ounce and COMEX silver futures down 3.02% at $88.86 per ounce [1] - U.S. oil main contract rose 0.08% to $65.47 per barrel, while Brent oil main contract increased by 0.48% to $71.03 per barrel [1] Currency and Bond Markets - At the New York close, the U.S. dollar index rose 0.13% to 97.79, and the offshore RMB against the U.S. dollar increased by 101.0 basis points to 6.8444 [1] - U.S. Treasury yields collectively fell, with the 2-year yield down 3.47 basis points to 3.430%, the 3-year yield down 4.47 basis points to 3.438%, the 5-year yield down 4.81 basis points to 3.569%, the 10-year yield down 4.59 basis points to 4.004%, and the 30-year yield down 4.06 basis points to 4.657% [1] - European bond yields generally fell, with the UK 10-year yield down 4.3 basis points to 4.273%, France's 10-year yield down 0.7 basis points to 3.247%, Germany's 10-year yield down 1.6 basis points to 2.689%, Italy's 10-year yield down 0.8 basis points to 3.299%, and Spain's 10-year yield down 1.2 basis points to 3.096% [1]

Core Viewpoint - The offshore RMB against the US dollar has experienced a rapid decline of over 100 points following the People's Bank of China's decision to lower the foreign exchange risk reserve ratio for forward foreign exchange sales from 20% to 0% starting March 2, 2026 [1] Group 1 - The People's Bank of China aims to guide financial institutions in optimizing foreign exchange hedging services for enterprises [1] - The central bank intends to maintain the basic stability of the RMB exchange rate at a reasonable and balanced level [1]

Group 1 - The onshore RMB against the USD reached a new high, with the exchange rate peaking at 6.8804 on October 24, marking the highest level since April 28, 2023 [1] - The offshore RMB also saw a peak at 6.8760, indicating a shift from depreciation to appreciation [1] - The improvement in the external environment, particularly the stabilization of China-US trade relations since November 2025, is a significant factor contributing to the RMB's strength [1] Group 2 - The weakness of the USD has created space for non-USD currencies to appreciate, influenced by the ongoing criminal investigation into the Federal Reserve Chairman and the pressure on the dollar [1] - Seasonal demand for corporate foreign exchange settlements is also supporting the RMB's appreciation, as high export growth has led to increased settlement demand [1] - The sentiment in the foreign exchange market has been positive, with the offshore RMB leading the way, further boosting the RMB's strong performance [1][2]

Market Performance - The three major U.S. stock indices experienced slight declines, with the Dow Jones down 0.13% at 50,121.4 points, the S&P 500 unchanged at 6,941.47 points, and the Nasdaq down 0.16% at 23,066.47 points [1] - Popular tech stocks showed mixed results, with Google and Microsoft down over 2%, Amazon down over 1%, while Intel rose over 2%, and Nvidia, Apple, and Tesla had gains of less than 1% [1] - Chinese concept stocks also had mixed performance, with Century Internet up over 12%, Kingsoft Cloud up 10%, and TSMC up over 3%, while NetEase fell over 4% and iQIYI dropped over 2% [1] European Market - European stock indices closed mixed, with Germany's DAX down 0.53% at 24,856.15 points, France's CAC40 down 0.18% at 8,313.24 points, and the UK's FTSE 100 up 1.14% at 10,472.11 points [1] Commodity Markets - International precious metal futures generally rose, with COMEX gold futures up 1.53% at $5,107.80 per ounce and COMEX silver futures up 4.60% at $84.08 per ounce [1] - U.S. oil futures rose 1.45% to $64.89 per barrel, while Brent oil futures increased by 1.15% to $69.60 per barrel [1] - London base metals saw an overall increase, with LME nickel up 3.29% at $18,065.0 per ton, LME tin up 1.59% at $50,065.0 per ton, and LME copper up 1.00% at $13,239.0 per ton [1] Bond Markets - U.S. Treasury yields collectively rose, with the 2-year yield up 6.41 basis points at 3.512%, the 3-year yield up 5.87 basis points at 3.569%, and the 10-year yield up 2.77 basis points at 4.170% [1] - European bond yields collectively fell, with the UK 10-year yield down 3 basis points at 4.475%, France's 10-year yield down 2.6 basis points at 3.377%, and Germany's 10-year yield down 1.6 basis points at 2.790% [1]

Market Overview - The Hang Seng Tech Index has fallen below the 5400-point mark, indicating a significant pullback after previous gains in sectors like internet platforms and semiconductors[1] - The market is experiencing a "cold spring" with reduced trading volumes and profit-taking behavior observed across various sectors[1] Economic Indicators - Fixed asset investment has decreased by 3.80% year-on-year[5] - Retail sales have shown a modest increase of 0.90% year-on-year[5] - Exports have risen by 6.60% year-on-year[5] - M2 money supply growth stands at 8.54%[5] External Factors - Recent U.S. economic data, including non-farm payrolls and service sector PPI, exceeded expectations, leading to a cooling of interest rate cut expectations from the Federal Reserve[1] - Domestic institutions are showing a strong demand for profit-taking to manage uncertainties post-holiday[1] Asset Allocation Trends - Southbound capital has shifted from high-growth tech stocks to high-dividend assets like telecommunications and banking[1] - The short-term support level for the market is projected to be between 5100-5250 points, coinciding with the 250-day moving average[1] Commodity and Currency Movements - The latest crude oil inventory is reported at 44,684 million tons, an increase of 44,935 million tons from the previous week[3] - The dollar long position has decreased to 16,610 contracts, down by 1,335 contracts[3]

Core Viewpoint - The Asian stock markets continued their strong performance, led by Japan, following Prime Minister Fumio Kishida's election victory, which boosted investor confidence and led to significant gains in the Nikkei 225 index [1][2]. Market Performance - The Nikkei 225 index surpassed the 57,000-point mark, rising by 2.64% to reach a new historical high [6]. - The Topix index also increased by 1.08%, setting a new record [2]. - The KOSPI index in South Korea rose by 1.21%, nearing its historical closing high [4][5]. - The S&P/ASX 200 index in Australia gained 0.39%, aiming for a third consecutive day of increases [4][5]. Currency and Commodity Markets - The offshore RMB strengthened, breaking the 6.91 mark against the USD for the first time since May 2023, currently reported at 6.9094 [9]. - The US dollar index stabilized around 96.97 after a significant drop, which was the largest single-day decline in two weeks [7]. - Gold prices fell by 1% to $5,016.56 per ounce, while silver dropped by 2.5% to $81.31 per ounce [10]. - WTI crude oil futures decreased by 0.1% to $64.15 per barrel [14].