China's yuan is rising faster in Asia, investors from UOB Asset Management Ltd. Union Investment predicting the world's largest foreign exchange reserves will help the currency to debt crises spread in Europe and the tensions on the Korean peninsula .
The yuan rose 0.6 percent against the U.S. dollar in the last month, while the South Korean won fell 2.8 percent. China's currency was the second best artist among the 25 emerging markets after the Chilean peso, which gained 0.8 percent.
The yuan will advance 6.6 percent late next year, the highest recognition in the BRIC countries Brazil, Russia, India and China, according to the median estimates of strategists surveyed by us. Selling 5 million yuan ($ 750 million) of bonds in Hong Kong Chinese government this week was 10 times oversubscribed, reflecting the growing global demand for the currency. Renminbi deposits in Hong Kong jumped 45 percent in October to a record 217 billion yuan, the Hong Kong Monetary Authority said 30 November.
"The renminbi has appreciated very stable trend," said Tse Chern Chia, director of fixed income in Mexico at UOB Asset Management who helps oversee 10.6 billion U.S. dollars and are interested in buying the debt of yuan in Hong Kong. "The Chinese are comfortable for the renminbi to appreciate by 4 percent to 5 percent every year against the U.S. dollar."
Broad Rally
The yuan was little changed at 6.6640 per dollar as of 14:56, in Shanghai, has strengthened 2.4 percent from a dollar parity two years ending 19 June. A trade-weighted index for the yuan, the JPMorgan general nominal effective exchange rate, up 2.2 percent in November, the biggest increase since February 2009. The yuan, the denomination of the renminbi, rose 6.4 percent against the euro, 3.7 percent against the yen and 2.6 percent to the pound.
China's currency will appreciate to 6.25 per dollar by the end of 2011, compared with 5.5 percent rise in the rupee India and the Russian ruble, and a decrease of 0.8 percent for the Brazilian real, according with the average estimate of analysts in surveys. China has 2.65 trillion U.S. dollars of foreign reserves, the largest in the world.
China's Finance Ministry sold debt in Hong Kong on 30 November with a maturity of three years, five and 10. Longer-maturity notes sold at a coupon of 2.48 percent, compared with a yield of 4 percent bonds due traded like Shanghai that day. The yield on the ground September 2020 debt remained unchanged at 4 percent yesterday.
Performance Differences
The difference in yield investors demand to hold bonds sold by China instead of U.S. Treasuries widened 60 basis points, or 0.60 percentage points last month to 150, the highest since May 2009, according to JPMorgan Chase & Co. 's EMBI Global Index.
Investors took the money from the funds of emerging market bonds in the week ended November 24, breaking a streak of 25 weeks of net inflows, according to EPFR global data released on 30 November. Funds focused on the debt of nations' attracted 51.8 billion U.S. dollars this year, November 17, surpassing the annual counts EPFR data dating back to 1995.
The appetite for high yield debt cooling and Greece joined Ireland in the last week to accept a ransom for the European Union and taken to North Korea fired an artillery barrage on an island in South Korea, killing four people and led to retaliatory measures.
China's central bank is trying to limit asset bubbles caused by the influx of capital in the second largest economy in the world. Lawmakers raised demands of lenders of reserves for the fifth time this year on 19 November, a month after increasing its benchmark interest rate for the first time since 2007.
The pain of manufacturers
China is going to go slow to let its currency appreciate to protect small companies competing in the global market, according to Ivan Leung, chief investment strategist in Hong Kong at JPMorgan Private Bank, which oversees $ 600 billion in assets.
"Many Chinese manufacturers are still in the lower-end value, where the margin is very narrow," said Leung. "There are a lot of companies facing wage increases and labor shortages, so they are already struggling to make a living. If you allow the currency to rise too quickly, forcing many companies into bankruptcy .
made in China grew at the fastest pace in seven months in November, the national federation of logistics, said yesterday said the central bank may further tighten monetary policy. The purchasing managers index rose to 55.2 from 54.7 in October.
Growth outperformance
Emerging market economies is forecast to grow 7.1 percent this year, with China after expanding 10.5 percent of gross domestic product grew 9.1 percent in 2009, according to the International Monetary Fund estimates released on 6 October. China registered a larger than expected 27 billion U.S. dollars trade surplus in October.
"The issue of trade and current account surpluses of China and the path of gradual tightening of monetary policy in China are the dominant forces behind the issue of gradual appreciation," said Sergio Dergachev, who helps manage equivalent of $ 8.5 billion of emerging market debt at Union Investment in Frankfurt. He expects the yuan to move about 3 percent next year.
The yuan has benefited last month as investors shunned riskier assets, "said Isaac Meng, an economist at BNP Paribas SA in Beijing, which predicts an increase of up to 5 percent next year.
"Compared with other Asian currencies such as the South Korean won, there is less volatility in the exchange rate of yuan," he said.
Less volatility
the one-month implied volatility, a measure of fluctuations in the exchange rate used to price options, was 4.1 percent for the yuan, compared to 14.9 percent for South Korean won and 9.6 per cent in the Indian rupee.
The annual cost of insuring the debt of China in foreign currency for five years with credit default swaps, was 67 basis points, 36 basis points less than this year's high of 103 points on May 25, according to CMA prices. The contracts pay the buyer face value in exchange for the underlying securities or the cash equivalent if the government fails to adhere to its debt agreements.
"The structural trend of the renminbi appreciation is due to the accumulation of huge reserves," said Anthony Chan, a strategist in Hong Kong Asia sovereign in AllianceBernstein LP, which oversees 499 billion U.S. dollars worldwide, in an interview yesterday. "While others, as the currency of Korea is particularly sensitive to risk-risk trade around the world."
0 comments:
Post a Comment