Core Viewpoint
Domestically, the social financing and credit in January achieved an unexpected &#34;good start,&#34; but the sudden acceleration of debt resolution after the Spring Festival may be related to the recent control of the bond bull market and a slight weakening of real demand. The actual GDP estimated using the production method for Q1 2025 may still be strong, coupled with the sustained boost of TMT enthusiasm to market risk appetite, the probability of policy strength during the Two Sessions being lower than expected has increased. Furthermore, once the TMT market cools down, the market may reinterpret the bond bull and dividend styles.
Overseas, Trump's first hundred days of new policies focus on foreign affairs, brewing reciprocal tariffs. &#34;Reciprocal tariffs&#34; are expected to have preliminary results on April 1. The most favored nation tariff rates implemented by the United States' major trading partners are mostly higher than those of the U.S., with relatively high tariff rates in places like India, Vietnam, Mexico, and Canada, making the probability of imposing reciprocal tariffs quite large. The situation between Russia and Ukraine is developing towards cooling down, and Kazakhstan and Israel have also agreed to resolve the ceasefire dispute, which may lead to a continued weakening of the dollar. This week, the decline in the dollar index and gold prices reflects the easing of geopolitical tensions.
As we have been indicating since the end of last year, if the Russia-Ukraine conflict ends, the euro is likely to experience a one-time valuation correction, and the dollar is likely to fall below 100, with a short-term target of dropping below 105. This trend has recently begun to show signs. The depreciation of the dollar will inversely push up the renminbi exchange rate, so this year, the depreciation pressure on the renminbi is not significant, and there is even a gradual possibility of appreciation, thus the risk appetite for A-shares throughout the year will not be too weak.
Main Text
Domestically, the social financing and credit in January achieved an unexpected &#34;good start,&#34; but the sudden acceleration of debt resolution after the Spring Festival may be related to the recent control of the bond bull market and a slight weakening of real demand. The actual GDP estimated using the production method for Q1 2025 may still be strong, coupled with the sustained boost of TMT enthusiasm to market risk appetite, the probability of policy strength during the Two Sessions being lower than expected has increased. Furthermore, once the TMT market cools down, the market may reinterpret the bond bull and dividend styles. However, unlike last year, this year the depreciation pressure on the renminbi is not significant, and there is even a gradual possibility of appreciation, thus the risk appetite for A-shares throughout the year will not be too weak. As we have been indicating since the end of last year, if the Russia-Ukraine conflict ends, the euro is likely to experience a one-time valuation correction, the dollar will depreciate and inversely push up the renminbi exchange rate.
Overseas, 1) Trump's first hundred days of new policies focus on foreign affairs, downplaying the China policy, and brewing reciprocal tariffs. Similar to the previous term, China-U.S. relations may first improve and then deteriorate, with initial tax rates expected not to be too high, and the probability of phased and batch increases is quite large. Trump announced that he would impose &#34;reciprocal tariffs,&#34; with preliminary results expected on April 1. The most favored nation tariff rates implemented by the United States' major trading partners are mostly higher than those of the U.S., with relatively high tariff rates in places like India, Vietnam, Mexico, and Canada, making the probability of imposing reciprocal tariffs quite large. 2) The situation between Russia and Ukraine is developing towards cooling down, and Kazakhstan and Israel have also agreed to resolve the ceasefire dispute, which may lead to a continued weakening of the dollar. From the recent statements of both Russia and Ukraine, Ukraine's stance on joining NATO and reclaiming all territories has softened, and Russia holds the upper hand, which may be related to U.S. pressure
In addition, on the 13th, Israel and Hamas finally reached an agreement on the exchange of hostages. This week's decline in the US dollar index and gold prices also reflects the easing of geopolitical tensions. As we have indicated since last year, once the Russia-Ukraine conflict ends, the US dollar is likely to fall below 100, with a short-term target of dropping below 105.
Domestic
1) In January, the new scale of social financing reached a ten-year high, with both on-balance-sheet credit and government bonds showing seasonal performance; January bank credit had a &#34;good start,&#34; with corporate medium- and long-term loans recording the first year-on-year increase in nearly 10 months. In January, new social financing exceeded 7 trillion yuan, a year-on-year increase of 8.0%, unchanged from the previous month. In terms of structure, the new credit under the social financing measure was 5.22 trillion yuan (compared to 4.8 trillion yuan in the same period last year, and an average of 4.7 trillion yuan over the past three years), setting a near ten-year high; new government bonds amounted to about 700 billion yuan (approximately 335 billion yuan in the same period last year), and &#34;non-standard&#34; financing and direct corporate financing combined exceeded 1 trillion yuan. In January, new RMB loans were 5.13 trillion yuan, exceeding historical levels (4.9 trillion yuan in the same period last year, and an average of 4.6 trillion yuan over the past three years); the credit growth rate fell to 7.5%, down 0.1 percentage points from the previous value. The new scale exceeded Wind's average expectation (4.32 trillion yuan), showing a strong &#34;good start.&#34;
2) On February 13, the central bank released the fourth quarter &#34;Monetary Policy Implementation Report.&#34; This report continues the spirit of the December Politburo report, reiterating the tone of &#34;implementing a moderately loose monetary policy,&#34; and emphasizes &#34;promoting a reasonable recovery of prices as an important consideration for grasping monetary policy, and pushing prices to maintain a reasonable level.&#34; It is expected that the priority of &#34;stabilizing prices&#34; will be significantly enhanced.** Since the Politburo meeting proposed a shift to a &#34;moderately loose&#34; policy tone, market expectations for reserve requirement ratio cuts and interest rate reductions have been heightened, leading the market to move ahead of policy implementation. In fact, measures such as reserve requirement ratio cuts and interest rate reductions have not been implemented; instead, liquidity began to tighten in the fourth quarter of last year, with the excess reserve ratio dropping from 1.8% (Q3) to 1.1% (Q4), until the price of funds significantly exceeded historical levels before the New Year, causing the market to feel the pressure of a &#34;small money shortage.&#34; The discrepancy between expectations and reality is believed to stem from changes in the premise of &#34;stabilizing growth.&#34; The pace of US tariff policies towards China does not align with previous expectations, and under the guidance of the follow-up principle, policies to stimulate domestic demand will also be adjusted accordingly. Another noteworthy change is that the report places &#34;reasonable price recovery&#34; in an important position, which not only responds to the requirements of the Central Economic Work Conference but also reflects that compared to &#34;stabilizing growth,&#34; the certainty of promoting reasonable price recovery is stronger. The Central Economic Work Conference held at the end of last year clearly required &#34;to strive for an optimized combination of stable growth, stable employment, and reasonable price recovery,&#34; indicating that promoting reasonable price recovery will be an important task of macro policy. In this regard, both the fourth quarter monetary policy meeting and this &#34;Monetary Policy Implementation Report&#34; have reiterated this. We believe that compared to &#34;stabilizing growth,&#34; the initiative to promote reasonable price recovery lies internally, making it more certain to implement, which will become a key focus of governance in the coming period
Overseas:
1) January U.S. inflation data exceeded expectations, mainly due to the impact of energy and food prices, while the increase in OER rent was relatively moderate. On February 12, 2025, the U.S. Bureau of Labor Statistics released: January CPI increased by 0.5% month-on-month (previous value 0.4%), core CPI increased by 0.4% month-on-month (previous value 0.2%); CPI increased by 3.0% year-on-year (previous value 2.9%), core CPI increased by 3.3% year-on-year (previous value 3.2%). Affected by new U.S. sanctions against Russia, Brent crude oil prices rose above $80 per barrel in January before retreating, slightly dropping to around $77 per barrel as of February 11. The energy component of January's U.S. CPI recorded an overall month-on-month increase of 1.1% (previous value 2.4%). Food prices rose sharply, with January food prices increasing by 0.4% month-on-month (previous value 0.3%) and 2.5% year-on-year (previous value 2.5%). Among them, household food prices increased by 0.5% month-on-month (previous value 0.3%), and non-household food prices increased by 0.2% month-on-month (previous value 0.3%). According to the BLS, this period's data will be affected by annual seasonal adjustments, and considering the supply-side shocks to food prices and the rebound in oil prices in January, the inflation risks implied by this month's CPI data are not as severe as the surface readings suggest. However, in the context of Powell's hawkish statements in Congress and tariff inflation risks, overseas markets are concerned that the Federal Reserve will maintain a pause on interest rate cuts for an extended period. CME data shows that expectations for Federal Reserve rate cuts have been pushed back to the second half of the year.
2) German economic activity index rises, Eurozone Q4 GDP seasonally adjusted preliminary value rebounds. For the week of February 10, the German economic activity index recorded 0.31%, up from the previous value of 0.12%. The Eurozone Q4 GDP seasonally adjusted preliminary value rebounded to 0.1%, up from the previous value of 0.0%.
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Risk Warning The implementation of domestic policies is stronger than expected; overseas economic recession is worse than expected. This article is sourced from: Jingguan Finance (ID: gh_22157128b33e) Original title: &#34;招商宏观 | Can the US dollar continue to weaken? - Reiterating that if the Russia-Ukraine conflict ends, it will suppress the US dollar from continuing to decline&#34; Written by | Zhang Jingjing Team, 招商宏观
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If the Russia-Ukraine conflict ends, the US dollar may continue to weaken, expected to fall below 100, which will inversely boost the RMB exchange rate, and the risk appetite in the A-share market will remain stable. Domestically, the performance of social financing and credit in January exceeded expectations, but after the Spring Festival, the pace of debt resolution will accelerate, and real demand will slightly weaken. The actual GDP in Q1 2025 is expected to remain strong, and the support of TMT enthusiasm for market risk appetite may weaken. The Trump administration's reciprocal tariff policy is also in the works

- In January, China's social financing and credit exceeded expectations, but post-Spring Festival debt repayment accelerated, possibly due to controlled debt market trends and slightly weakened demand.  
- The U.S. is considering "reciprocal tariffs" as part of Trump's new policies, with preliminary results expected by April 1, while the geopolitical situation, particularly the Russia-Ukraine conflict, shows signs of easing, potentially leading to a weaker dollar.  
- If the Russia-Ukraine conflict concludes, the euro may experience a valuation correction, and the yuan could appreciate, reducing depreciation pressure on the currency throughout the year.

If the Russia-Ukraine conflict ends and the US dollar declines, it will be beneficial for A-shares!