The Impact Analysis Of RMB Exchange Rate To Stock Market

On July 21, 2005, announced by the People's Bank of China: State Council approved that our country has been carrying out the introduction of the basis of market supply and demanding with reference to a basket of currencies, the managed floating exchange rate system. From taking U.S. dollar as the single aim to considering the basket of currencies, with implementing a market-based, managed floating exchange rate, so the formation of a more flexible RMB exchange rate mechanism will be founded– the reform of China exchange rate system has taken an important step. At this point, the adjustment of the RMB against the U.S. dollar was trading at 8.11 Yuan against 1 U.S. dollar. Up to December 2010, the RMB against the U.S. dollar has been risen to 1 U.S. dollar 6.70 Yuan, during these years, the value of RMB has been increased with the rate of four percent per year. However, there were much of circuitous, it maintained the appreciation trends. After the foreign exchange has been reformed, the Shanghai index of July 2005 from 1,000 to 6,000 points in 2007 after the bull market, and now it's gradually stabilized at around 3,000, the growth almost to 300% compared with original reform. If there is any relationship for it.Many scholars implemented the research about which the relationship between exchange rate changes and stock market changes, there are varied opinions, but with no consensus in theory. And the vast majority of scholars have been studying the market of developed countries, with less emerging market research. The objective of this thesis is to further study the relationship between RMB exchange rate and our country stock market, so as to maintain the basic stability of RMB exchange rate, improve the RMB exchange rate formation mechanism, and make constructive comments and suggestions which can maintain stable and healthy development in stock market.In this paper, researcher committee to analyze and improve domestic and foreign scholars'research results through consulting their experiences. And researcher will analyze the data which gained from the exchange reform in 2005, the RMB exchange rate against the U.S. dollar ,the RMB exchange rate against the euro and the RMB exchange rate against Yen exchange rate respectively. At last, author will deal the Shanghai index and the Shanghai B share index with statistical analysing. This paper can be divided into six parts:The first part, introduce the purpose and significance of the thesis, as well as the results of domestic and foreign researches.The second part, introduce theoretical basis of this paper, focusing on the general theory of the exchange rate influences the stock price, and analyse the stock market situation after the exchange rate of Japan, Germany, China Taiwan and South Korea. In addition, the paper also introduces China foreign exchange market, stock market development process and the current situation which will be solved in this paper.The third part, according to the stage characteristics of exchange rate changes, establish a regressive model which revealing the relationship between exchange rate and stock index, deal with the relationship between exchange rate and stock index with statistical analysis. At the same time, select the different stages of the Shanghai index data after 2005 and the RMB against the dollar, the benchmark price of euro exchange rates, with the established relationship between exchange rate and stock index to analyze the relationship between the exchange rate and stock index. Researcher use ADF unit root test for data stationary test to the selected exchange rates and stock price data, with the aim of avoiding "pseudo regression" results. Then, use the cointegration test and Granger causality test to analyze the relationship between exchange rate and stock index which is the key problem to be solved in this paper.Meanwhile, analysis will also be applied on the appreciation of the RMB exchange rate in different industries (including apparel, banking, automotive, petrochemical industry, etc.) .The fourth part, analyze the appreciation of RMB of stock market.The fifth part, through the analysis on different sectors, analyze the exchange rate reform on the part of the of key industries index.The sixth part, puts forward some policy recommendations on exchange reform.This paper attempts to research to conduct a comprehensive, in-depth study on the exchange rate change to the stock market in theory and evidentce, to make an effort to theoretical, empirical and systematic support, and not lack of depth. In this paper, foreign scholars'Cointegration Test, the analysis method of Granger causality test have been commonly used, currently, they are rarely used by the scholars to have the research between exchange rates and the stock market. In addition, according to the different characteristics of the economic changes and exchange rate changes, researcher analyses the relationship between exchange rates and stock indexes from different stages, so that the relationship between exchange rate and stock index could be more prominent. Through using the high frequency daily data, analyses the phase relationship between exchange rate changes and stock index, at the same time, analyses the exchange rate changes have the impact on the Shanghai index, the impact on the B shares and the impact on different sectors. Analysis points are comprehensive, systematic. Researcher analyze the general relationship between exchange rates and stock prices from the macro and micro aspects, and further explains the RMB exchange rate movements will have the possible impact on the stock market. Analysis also on some parts of the representative international nation and region respectively after the exchange rate reform. Through conclusions to guide China exchange rate reform, so as to maintain the basic stability of RMB exchange rate, improve exchange rate formation mechanism of RMB and make constructive comments and suggestions to maintain the stable and healthy development of the stock market.