Register  
No end in sight for renminbi rally
Thursday, 28 March 2013 12:25pm
By Mark Smith  |  In Economics

The unbridled appreciation of Chinese currency will not be halted by uncertainties about the economy's short-term economic outlook, according to new research by AllianceBernstein.

The investment manager says the strength of structural factors, rather than the weakness of cyclical ones, will see the renminbi continue to improve its tradeability, valuation and prestige for the foreseeable future.

According to AllianceBernstein director for Asia Pacific fixed income Hayden Briscoe, the currency will appreciate by 2-3% a year on average, just to keep pace with the country's persistent trade surpluses, and by up to 5% a year once economic rebalancing is factored in.

Briscoe adds that the gap between the US and Chinese economies in purchasing power parity is likely to close in just a few years.

Investors can benefit from an appreciation in the Chinese currency by holding renminbi-denominated assets as many emerging markets local currency debt funds do.

A higher renminbi could also hurt Chinese exports by making it more expensive for overseas economies to by goods, resulting in an increased focused on the Chinese consumer. This would benefit investors in emerging markets or China specific funds because most portfolio managers have already positioned to take advantage of the theme.

AllianceBernstein is already predicting that the renminbi will be more commonly used as a reserve currency.

"The renminbi already fulfills two of the three criteria necessary to become a reserve currency-the size of the underlying economy and the credibility of the currency itself. It is progressing steadily towards fulfilling the third criteria, which is openness and financial-market depth," explained Briscoe.

Internationalising the currency is one of the goals under the country's five-year plan and, in early September 2012, Dai Xianglong, a former People's Bank of China governor, said that China could liberalise its capital account as early as 2015.

"While the precise timing will depend somewhat on global economic and financial-market conditions, we think the RMB is likely to be internationalised much faster than widely expected," Briscoe added.

Blogs
Follow the industry experts.
Christopher Page
Christopher Page
Managing Director

A new regulator? Better empower ASIC
The Australian financial services industry and Australia's financial advisers already have regulator dedicated to policing standards ...read more
 
Benjamin Ong
Benjamin Ong
Chief Economist

Reflation, rotation and the taper
'Tis being my final type (drivel, to some gentle readers) for the year, we'll take a look back at the 2013 that was to seek the lessons ... read more
 
Alex Dunnin
Alex Dunnin
Director of Research & Editorial Services

Thought leadership and the art of living dangerously
Superannuation is one of the Australian economy's major pillars and it is time its leaders stepped out from behind their abacuses and ... read more
News Search   
VideoBrought to you by
Managed Accounts Forum 2014 Highlights
Around 150 delegates attended Financial Standard's inaugural Best Practice Forum in Managed Accounts held in Sydney in August. Financial Standard also launched a new magazine: FS Managed ... Watch video
The New Neutral
At this year's PIMCO Secular Forum, the company's global executives set themselves the challenge of taking a three to five year view and anticipate where the market would be against what investors would ... Watch video
Colonial First State Multi-Asset Real Return Fund
Find out more about the investment philosophy and objective of the Colonial First State Multi-Asset Real Return Fund. Senior Portfolio Manager, Kej Somaia explains. Watch video
Why Multi-Asset Solutions?
Joe Fernandes, Head of Global Investment Solutions at Colonial First State Global Asset Management talks about the advantages of objective-based investing in the multi-asset space. Watch video
Zurich Investments Global Growth Share Fund
The pool of investable funds in the retail sector is ever growing, and as investors become more sophisticated the appetite for global equities is only going to increase. In this video, Noble says with ... Watch video
Introduction to Series #07
What are the key challenges advisers face when building retirement portfolios for clients? Watch Joe Fernandes, Head of Global Investment Solutions at Colonial First State Global Asset Management. Watch video
Get it
Daily
FREE to your inbox, get the Financial Standard Daily Email.
Get the Free
iPad app
Download the Financial Standard iPad app for FREE
Industry
Events
OCT
26
OCT
28
Unlock the value of diversification with mFund
30
Unlock the value of diversification with mFund
NOV
05
ALTERNATIVE INVESTMENTS 2014 CONFERENCE
12
Global CIOS Symposium
13
2014 Financial Standard Social Media Influence, Leadership + Excellence Scholarship Program (SMILEYS)
News
Bites

$245 (inc GST) for 1 year
 
 
Copyright © 1992-2014 Rainmaker Group
All material on this site is subject to copyright. All rights reserved. No part of this material may be reproduced, translated, transmitted, framed or stored in a retrieval system for public or private use without the written permission of the publisher.
Link to something 51aDBBEw