Analysis of Beneficiary Industries and Asset Allocation Strategies During the RMB Appreciation Cycle

Combined with CITIC Securities’ research on 7 RMB appreciation cycles over the past 20 years [0], although exchange rate is not the dominant factor for industry allocation, about 19% of industries will achieve profit margin improvement due to RMB appreciation, and some industries sensitive to market sentiment perform better in the early stage of appreciation expectation formation. Specifically, beneficiary industries mainly include four categories: 1.

(e.g., aviation, paper making, auto parts), where RMB appreciation can reduce their costs of imported raw materials or equipment [0]; 2. (e.g., aviation, real estate), where appreciation will reduce the RMB-denominated cost of foreign debt and improve the company’s financial condition [0]; 3. (e.g., tourism, education), where RMB appreciation reduces the cost of overseas travel and study for domestic residents, which will drive growth in related demand [0]; 4. , where appreciation enhances domestic consumers’ purchasing power, especially benefiting areas related to imported luxury goods [0].

In terms of asset allocation strategies, investors need to pay attention to the following directions: 1. Appropriately reduce the allocation of USD assets, as RMB appreciation will lower the RMB-denominated value of USD assets [0]; 2. Increase the allocation ratio of the above-mentioned beneficiary industries to seize the profit improvement opportunities brought by appreciation [0]; 3. In the early stage of appreciation expectation, focus on financial and non-bank financial industries that are sensitive to market liquidity and risk appetite [0]; 4. Maintain the diversification of asset allocation to reduce risks caused by fluctuations in a single industry [0].

1. Dual Benefits for Aviation Industry
   : The aviation industry has both import-dependent (fuel, aircraft imports) and high foreign debt attributes, so it benefits more significantly during the RMB appreciation cycle [0].
2. Sentiment Driven in Early Expectation Stage
   : Industries such as finance and non-bank finance are sensitive to changes in market sentiment, and are more likely to obtain short-term excess returns in the early stage of appreciation expectation formation [0].
3. High-end Consumption Linked to Exchange Rate
   : RMB appreciation enhances domestic consumers’ overseas purchasing power, which will directly promote demand growth in the high-end consumption industry, forming a positive linkage between exchange rate and industry prosperity [0].

: During the RMB appreciation cycle, beneficiary industries may obtain excess returns due to factors such as cost reduction and demand improvement, providing a clear direction for asset allocation [0].

: First, there is uncertainty about the magnitude and duration of RMB appreciation, so it is necessary to closely monitor exchange rate trends and policy changes [0]; second, the degree of benefit may vary among different companies in the same industry due to individual factors such as import dependence and foreign debt scale [0]; third, RMB appreciation is affected by external factors such as Sino-US interest rate spread, balance of payments, and global economic situation, so it is necessary to consider multiple variables comprehensively [0].

The RMB appreciation cycle brings potential profit improvement opportunities for import-dependent sectors, sectors with high foreign debt, service sectors, and high-end consumption industries. When allocating assets, investors can appropriately tilt towards these beneficiary industries and reduce the allocation ratio of USD assets. However, it should be noted that exchange rate is not the only determinant of industry allocation; it is necessary to make comprehensive judgments by combining industry fundamentals, macroeconomic environment and other factors, while maintaining the diversification of asset allocation to control risks.