全人民币升值的估值逻辑_ The Valuation Case for a Stronger CNY

Summary of the Conference Call on the Chinese Yuan (CNY) Valuation Industry Overview - The focus of the discussion is on the foreign exchange (FX) market, specifically the valuation of the Chinese Yuan (CNY) and its expected performance against the US Dollar (USD) in the coming years [2][4]. Core Insights and Arguments 1. CNY Valuation Outlook: The CNY is projected to outperform the appreciation embedded in forwards by 2026, supported by above-consensus forecasts for export growth and the current account [2][4]. 2. Undervaluation of CNY: The Yuan is currently estimated to be around 25% undervalued based on two valuation models, GSDEER and GSFEER. The GSDEER model indicates a fair value close to 5.00, suggesting a 30% undervaluation against the Dollar [4][6]. 3. Inflation and Productivity: Low inflation and high productivity in China relative to the US have contributed to the strengthening of the GSDEER fair value over time. This trend is expected to continue, with projections indicating that the Yuan will remain undervalued even with anticipated appreciation [6][9]. 4. Current Account Strength: The current account surplus is projected to grow, which is expected to exert appreciation pressure on the CNY. The current account surplus is estimated at around 3.6%, significantly above the 'norm' of 1.7% [15][16]. 5. Export Competitiveness: The argument that CNY undervaluation drives the competitiveness of Chinese exports is countered by the view that a stronger Yuan would still leave it in inexpensive territory, thus not contradicting export outperformance [24][30]. Risks Identified 1. Weak Domestic Demand or Export Growth: A potential risk is that domestic demand or export growth may be weaker than expected. However, further policy easing is anticipated if this occurs [30]. 2. Policy Choice on CNY Appreciation: CNY appreciation is ultimately a policy decision, which historically has shown low convergence rates to fair value. Nonetheless, there is optimism due to consistent policy pushes towards CNY strength observed this year [30]. Additional Insights - Asymmetry in Returns: Recent data shows a positive asymmetry in rolling total returns for long CNY positions, indicating that despite carry costs, there may be favorable outcomes for investors [30][33]. - Historical Context: The dynamics observed during the first China Shock in 2005, where a significant revaluation followed a period of strong export performance, are referenced as a potential parallel to current conditions [24][28]. Conclusion - The overall sentiment is bullish on the CNY, with expectations of gradual and managed appreciation against the USD, supported by strong current account dynamics and favorable macroeconomic conditions [30].