Yang Delong: Appreciation of the Yuan Exchange Rate Is Conducive to Raising the Valuation Level of Yuan-Denominated Assets

This month, the A-share market was significantly impacted by the Middle East conflict, experiencing a substantial correction at one point, and the market style also shifted accordingly. The technology sector, which had previously seen large gains, experienced a clear pullback with prominent profit-taking. Meanwhile, traditional blue-chip sectors represented by HALO assets showed signs of stabilization and recovery.

The so-called HALO assets refer to industries proposed by major international investment banks, characterized by heavy assets and low淘汰率 (淘汰率 means淘汰率, or淘汰率). These industries have large fixed asset investments, high entry barriers, and are not easily replaced by AI. They mainly include non-ferrous metals, coal, railway logistics, electrical equipment, and power sectors. Despite the AI era, these assets still hold an important position, and their heavy asset nature makes it difficult for new entrants to compete, thus becoming one end of this year’s new dumbbell strategy. The other end remains the technology innovation sector. Recently, the government work report emphasized developing new productive forces, and the “14th Five-Year Plan” outline approved at the Two Sessions highlighted areas such as humanoid robots, chips and semiconductors, computing power algorithms, controllable nuclear fusion, commercial aerospace, energy storage, and biomedicine. These fields are likely to remain key investment themes in the future. Therefore, I believe this year’s new dumbbell strategy can be summarized as “Technology + HALO assets,” which is expected to be a significant market feature throughout the year.

Regarding concerns that the Middle East conflict might end this round of slow and long-term bull market, I clearly state it will not. The Middle East conflict is only a short-term disturbance and will not have a substantial impact on the long-term trend of the A-share market. The current slow and long-term bull trend has already been established, and its underlying logic has not fundamentally changed. Policies continue to support the development of the capital market. During the Two Sessions, CSRC Chairman Wu Qing further emphasized supporting deepening reforms and relaxing conditions for tech innovation companies to list on the ChiNext, opening green channels for truly promising tech firms. This important statement has injected confidence into the market. Although the spring offensive was temporarily interrupted by the Middle East conflict, with the upcoming annual report season, sectors and stocks with performance exceeding expectations are becoming new leaders, potentially restarting the spring rally and triggering a strong rebound. Therefore, investors should maintain confidence and patience at this stage.

On the RMB exchange rate, as I predicted in my 2026 Top Ten Predictions, the RMB will appreciate amid the decline of the US dollar index. Last year, I forecasted that the RMB/USD exchange rate would break below 7, and this year it would further appreciate back to around 6.8. This prediction has now been validated. At the end of last year, the RMB/USD exchange rate briefly fell below 7, but recently it has rebounded to around 6.85, approaching 6.8. RMB appreciation was expected because the long-term trend of the exchange rate is closely related to economic growth, import-export trade, and monetary policy.

The main reasons for RMB appreciation include: First, the Federal Reserve is in a rate-cut cycle, and the US dollar index is expected to gradually decline, which will support the appreciation of non-dollar currencies, including RMB. Over the past year, the Fed has cut rates multiple times; this year, rate cuts may be delayed, with no change expected in March, but possible rate cuts in the second half. Second, China’s economy is showing marginal improvement. After a series of policies to stabilize growth, economic data has begun to improve significantly. Recent data for January and February show marginal improvements in prices, industrial added value, import-export trade, and fixed asset investment, providing some support for the RMB exchange rate. Third, US stocks are currently at high levels, while A-shares and Hong Kong stocks are still relatively undervalued, attracting international capital inflows seeking opportunities. Investing in A-shares requires currency exchange, increasing demand for RMB. Additionally, some foreign trade companies held foreign currency in previous years without timely conversion; as the RMB appreciates, their conversion needs are being released, jointly driving the RMB exchange rate higher. I believe that maintaining RMB stability within a reasonable range is ideal—neither rapid appreciation nor rapid depreciation. Recently, the State Administration of Foreign Exchange announced a reduction of the foreign exchange reserve requirement ratio from 20% to 0%, to prevent excessive RMB appreciation and maintain reasonable fluctuations. Overall, during RMB appreciation, more foreign capital tends to flow into RMB assets, which helps to revalue RMB asset prices.

The market has gradually moved past the short-term volatility caused by the Middle East conflict and is returning to normal operation. Regarding the future, I believe investors should remain confident and patient. There are still many investment opportunities this year, but it is crucial to adhere to value investing principles and base decisions on fundamentals. Chasing highs and selling lows, or frequent trading, are often the root causes of losses for many investors. Over the past decade, I have attended Warren Buffett’s annual shareholder meetings in the US seven times, introducing Buffett’s value investing philosophy to domestic investors and proposing a Chinese-style value investing theory, which has been widely recognized. This May Day, I will continue leading some investors to Omaha to attend the 2026 Berkshire Hathaway Annual Meeting, and then visit major international investment banks like Morgan Stanley on Wall Street, aiming to further introduce Buffett’s value investing principles to a broader audience, helping value investing take root and flourish in the A-share market. I firmly believe that坚持价值投资 (坚持价值投资) is the best way to cure investment anxiety. Investors need to strengthen their confidence and truly seize opportunities from a long-term perspective.

(Author is Chief Economist and Fund Manager at Qianhai Open Source Fund)

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