RMB Breaking 7 Zhengmian Down ICE Cotton For Three And A Half Years Low

In the morning (August 5th), the offshore and onshore RMB exchange rate was 7 against the US dollar. Among them, offshore RMB against the US dollar fell below the 7 pass at 9:16 in the morning, once dropped to 7.1092, and the offshore RMB against the US dollar also fell below the 7 pass at 9:32 a.m., and once "depreciated" to 7.0397. This is also the first time that the RMB exchange rate has broken 7 since the "811 exchange reform" in 2015. Previously, the RMB exchange rate has experienced several "breaking 7" sensitive moments, but it finally recovered.

Meanwhile, in August 5th, the central parity of RMB against the US dollar dropped 6.9 points, the first time since December 2018.

Textile enterprises: "broken 7" unexpected, conducive to exports

The head of a textile export enterprise in Zhejiang said: "we did not expect to fall suddenly. We thought we had talked about it almost, and increased the proportion of forward lock in to RMB, but unexpectedly we broke 7. In the past, when the exchange rate fell, it might encounter customer pressure, but since last year, it has experienced a very special period, and the price reduction is still relatively small. The fall in the exchange rate is indeed conducive to the thickening of financial profits of export enterprises, especially the textile industry which is more sensitive to price. "

The central bank: the RMB exchange rate can basically remain stable at a reasonable and balanced level.

"What needs to be explained is that the RMB exchange rate has broken 7. This 7 is not the age. In the past, it could not come back, nor was it a dyke. Once it was washed away, it would be a great drain." 7 is more like the water level of the reservoir, which is higher when the flood season is high, and it will be down when it reaches the dry season. The central bank's responsible person said.

Textile and apparel leading stock trading

Today's textile and apparel market is on the decline in the background of the big market. As of midday closing, China Textile shares, Disheng and Sino submarine shares were all trading on limits; star technology, Jiaxin silk, Nanfang textile, Phoenix Bamboo textile, Yong Yi shares, Huasheng shares and Shanghai San Mao shares rose.

Garment and textile industry is one of the traditional export industries in China. In recent years, influenced by the appreciation of the RMB exchange rate, the rising cost of raw materials and the expansion of inventory, the competitiveness of the whole industry in the international market has been weakened, and the export of textile and clothing has declined year by year. This also makes the share price of textile stocks mostly at a relatively low level in the two cities, and the attractiveness of the whole textile industry has dropped sharply.

The situation has changed since the beginning of this year, and the RMB has obviously depreciated this year. The export competitiveness of the entire textile industry is expected to be enhanced under the stimulation of devaluation. Insiders say that the textile industry has a high degree of dependence on exports. The devaluation of the RMB will help the company reduce costs and enhance the competitiveness of its products, so that enterprises can get more orders. On the other hand, it is beneficial for export oriented enterprises to obtain foreign exchange earnings, which will further stimulate consumption and benefit the export of textile products. At present, half of the textile listed companies in the A share market account for more than 50% of the total export business. According to industry related calculations, the textile and garment industry has benefited from the depreciation of the RMB, and the depreciation of RMB by 1% can raise net profit by 2%-6%.

Domestic and foreign cotton continued to slow down, the reserve cotton transaction cooling down

Last week, Trump said on twitter that it would start to impose tariffs on 300 billion US dollars in Chinese exports to the United States in September 1st, while US $300 billion would contain all the textiles and clothing. This prompted the market to worry about the escalation of trade war, which is also directly reflected in the continuous breaking of domestic and foreign cotton futures prices.

Last Friday (August 2nd), ICE cotton volume plummeted, the main contract in December fell below 60 cents support, the day settlement price of 59.42 cents, a three year low. Today (August 5th), Zheng cotton began to decline sharply, and the whole afternoon was down. The closing price was 12225 yuan / ton, the lowest since June 2016. According to foreign media reports, China has suspended its commitment to buy more US agricultural products, suggesting that the conflict between the two sides has increased further. The market is quite skeptical about the resumption of negotiations in the near future. Affected by this, the current ICE cotton sub market has fallen more than 3%, once again set 57.26 cents / pound for nearly three and a half years, a distance of 54.53 cents / pound, which is only one step away from the lowest price in the last ten years.

Today (August 5th), the cotton business contracted cold, the turnover rate was only 48.04%, the average price of the transaction was 11974 yuan / ton, compared with the previous trading day fell 374 yuan / ton, and then hit a new low.

How do market participants view the trend of the future market?

Nanhua Futures: in recent years, under the background of normalization of production gap, cotton inventories have continued to decline, inventory consumption ratio has declined rapidly, the investment value of cotton has been gradually increased in many commodities, and the atmosphere of funds has become increasingly strong. But on the other hand, because of the short supply and consumption uncertainty, the industry's view of cotton market is slightly pessimistic. At present, cotton prices are doubtless low, but before the new contradictions appear, consumption will still be a major factor affecting cotton prices.

Although cotton still has the internal driving force of rising, at present, due to the abundant supply of cotton market, the pressure of consumption and the pessimism of the market, it is expected that the cotton rate will still show a low trend. However, it is necessary to pay close attention to the weather conditions, trade consultations and the recovery of downstream demand in the cotton fields around the world.

CICC online: macroeconomic uncertainty increases, asset allocation of foreign institutions is more inclined to hedge assets. Under this background, the US cotton trade friction has been repeatedly attacked, breaking through the long-term support of 60 cents. Zheng cotton has been constrained by the pressure of inventory and the problem of the downturn in the downstream purchase and sale. It has not been significantly supported by the previous support. The follow-up needs to pay close attention to the situation of orders and warmup in August. If there is no improvement, the follow-up will be further explored.

Cotton Exchange Center: since 2018, the great changes in the cotton market are behind the dramatic changes in the internal driving force and external environment that support the operation of China's and the whole world's cotton industry. The trade war between China and the United States has cast a shadow on the global economic outlook, and the impact on market sentiment, downstream orders and consumption expectations can not be ignored. But all of these are external causes. From the current situation, after 4-5 years of continuous inventory, the global cotton market is facing the turning point from turning to warehouse, which is the profound internal logic of market evolution, and is having a huge impact on the current and future trend of the cotton market. (source daily economic news, twenty-first Century economic report, Nanhua futures, China gold online / editor finishing Shanghai international cotton trading center)