Published Aug 13, 2018 04:00PM ET
Updated Aug 13, 2018 05:00PM ET
China’s Yuan Slump Almost Over, Says StanChart Veteran
(Bloomberg) -- The worst of the plunge in China’s yuan should be behind us.
That’s the view of Charles Feng, head of macro trading for Greater China at Standard Chartered (LON:STAN) Plc., even as drama in Turkey rattles markets worldwide. Factors pressuring the yuan -- such as trade tension and easing China monetary policy -- are almost priced in, while there’s limited room for the dollar to rise further, he said. Investors could also start seeing a bottom for mainland stocks, which are down more than 20 percent from this year’s peak.
Hong Kong-based Feng, who oversees foreign-exchange, rates and local-currency corporate bond trading, said there’s a “good chance” of a retracement in the yuan that could be as rapid as the recent declines, if the dollar weakens. China isn’t likely to intervene heavily provided the moves are in line with economic fundamentals or the overall dollar direction, he said.
The yuan is Asia’s worst performing currency over the past three months, sliding around 8 percent against the dollar as trade friction with the U.S. heated up and the People’s Bank of China took easing steps to support the economy. Policy makers have made it more expensive to short the yuan and urged banks to avoid “herd behavior” in the currency market. While a weaker yuan could help exporters better cope with U.S. tariff hikes, it also risks denting foreign interest in onshore assets.
Read: PBOC Vows No ‘Strong’ Stimulus, Says Won’t Use Yuan in Trade War
The best China trade in the short-term is risk-free bonds, as liquidity is flush and concern lingers over credit default risks, said Feng, who has been a trader for more than a decade.
“There’s huge room for foreign ownership of Chinese bonds and stocks to go up,” he said. “We already see some investors who never touched that market in the past now trading in very big size.”
Here is a summary of Feng’s views:
Written By: Bloomberg
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