Goldman Sachs turned to completely bearish RMB experts said they believe in Goldman Sachs

On June 3, Goldman Sachs Group issued a warning that as China's central bank guides the gradual depreciation of the renminbi against the US dollar, the risk of accelerating capital outflows in China may increase, affecting the global market and eventually leading to a large scale similar to January and August last year. Selling the market, causing market turmoil.
Goldman Sachs expects China’s foreign exchange reserves to lose between US$200 and US$300 billion this year and next, and to shift its renminbi expectations from a “relatively constructive” view to a “completely negative” view.
At the same time, domestic experts expressed different views. The industry believes that the RMB exchange rate is indeed facing some depreciation pressure against the background of the Fed’s expected interest rate hike and the downward pressure on the domestic economy. However, with the further improvement of the RMB exchange rate formation mechanism, the RMB exchange rate will fluctuate in both directions within a reasonable range.
Bloomberg Asia's chief economist Oral Eagle recently wrote that even if the yuan fell against the dollar, China's economic growth resilience, stable asset prices and improved communication mean that the panic at the beginning of the year may not reappear.

In addition, industry insiders pointed out that Goldman's point of view is not so accurate, even called "the most reliable reverse indicator" by some professional people. As early as February this year, when New York crude oil fell to the bottom near 27 US dollars, Goldman Sachs issued a viewpoint. Crude oil is expected to fall to $20, but crude oil prices have subsequently reversed sharply, rising all the way and breaking the $50 mark.
In addition, last year Goldman Sachs reported in the report that the six major recommended transactions in 2016, but in the beginning of 2016, less than 40 days, there have been five recommended transactions were stopped out, almost all the army.

Goldman Sachs turned into a complete bearish renminbi depreciation may lead to targeted speculation According to Bloomberg News, Goldman Sachs strategists led by Goldman Sachs analyst Robin Brooks said in a research report on Thursday: For the renminbi, "we turned to complete Negative position." The People's Bank of China has guided the exchange rate of the renminbi against the US dollar, and its "risk is that it may ignite the capital outflows like last August and early this year."
China has changed the way the renminbi is managed. It is based on a basket of currencies to determine its exchange rate. This makes the renminbi against the US dollar seem to be less important. However, Goldman Sachs strategists stressed that such a strategy does not seem to be successful in curbing capital outflows, because the most sensitive of Chinese households and businesses is the exchange rate of the renminbi against the US dollar. They pointed out that the weakening of the renminbi may even threaten the Fed and force them to delay the tightening of monetary policy.
“We believe that there is a high probability that the market will once again speculate on the one-off depreciation demand, even if policymakers claim that this is not considered at all.”
Along with the previous two weakening of the renminbi, there was a sharp outflow of capital. China’s foreign exchange reserves fell by $137.2 billion in August and September last year, more than a quarter of the decline in 2015. In December of that year, it was reduced by 107.9 billion US dollars, setting a record high in history. The situation of capital outflows continued until January and February of this year, and the total foreign reserves in the two months fell by $128 billion.

Investors don't understand a basket of currencies and only recognize the middle dollar price. Goldman Sachs changed its view this time. The first reason given is that the market does not buy the RMB trade-weighted index. Brooks and others believe that the Chinese central bank wants to direct market attention to the renminbi currency basket, but the process is not so easy.
They said: "In China, whether it is domestic residents or enterprises, they only value the central parity of the yuan." As of Thursday, Beijing's central parity has hit a five-year low for three consecutive trading days.
This seems to Goldman Sachs, which means that the same market turmoil risk as in August last year and early this year is rising. They believe that such a weak middle price will inevitably lead to speculation that the renminbi may once again usher in a one-off sharp depreciation - even though the Chinese government says they will not do so.
The median estimate of analysts from the Bloomberg survey shows that the yuan will depreciate 1.8% to 6.70 yuan for the rest of the year. Among the institutions surveyed, Credit Suisse’s forecast for the RMB exchange rate at the end of the year was the largest, followed by Mitsubishi UFJ Financial Group, Mizuho Bank and North German Bank. The Dutch cooperative bank has the strongest bearish sentiment and is expected to fall to 7.13 yuan.
Goldman Sachs quoted market historical performance and predicted that when the central parity of the yuan was weakened, the S&P 500 index would fall sharply in the next one to two weeks, as concerns about the depreciation of the renminbi and China’s capital outflows were rebuilt. The S&P 500 index fell 6.3% in August last year. Goldman Sachs analysts pointed out that the turmoil in the international market, especially in the US market, may in turn have a knock-on effect on the Fed’s tightening policy and the pace of dollar appreciation.
Capital outflows are serious, and China’s foreign exchange reserves are expected to lose between US$200 and US$300 billion this year and next.
Analysts led by Brooks believe that if the financial system is once again turbulent, the S&P 500 index will fall sharply, and the Fed may once again turn to the "doves" position, the so-called RMB-FOMC monetary policy cycle reaction. Goldman Sachs believes that the probability of the Fed raising interest rates in the summer is 70%.
However, Bloomberg Asia's chief economist Oral Eagle recently wrote that even if the yuan fell against the dollar, China's economic growth resilience, stable asset prices and improved communication mean that the panic at the beginning of the year may not reappear.
He believes that a number of factors are shifting in a favorable direction. It also explains why despite the rise in the US dollar exchange rate and the decline in the RMB exchange rate since May, there has been almost no panic reaction in the past during the weak period.
The median forecast by Bloomberg's analysts shows that China's foreign exchange reserves may resume a decline in May after a three- or four-month growth, a slight decline of $19 billion. Chinese officials will release May foreign exchange reserve data from June 6th to 7th. The Bloomberg survey found that although a slight decline is expected, the balance will stand at $3.2 trillion for four consecutive months.
The Goldman Sachs team led by Brooks expects China’s foreign exchange reserves to lose between $200 and $300 billion this year and next. However, in their view, with the scale of China's foreign exchange reserves, the pressure to cope with such capital outflows is more than enough. According to official data compiled by Bloomberg, China’s foreign exchange reserves fell by 512.7 billion U.S. dollars in 2015, the first annual foreign exchange reserve reduction in the past 20 years.

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