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.

Advertisement

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

Medcraft's appalling speech
I am surprised. More than that, I am astonished, shocked. Last week I was left speechless by the address that the Australian Securities ...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

Women-led companies better for investors
The Australian government end last year released its first Gender Equality Scorecard and while the results are discouraging, a separate ... read more
News Search   
VideoBrought to you by
Great unwindings
Bob believes plunging oil prices may extend the stockmarket rally by a year or two and discusses why investors could expect a volatile few months. Overall, he believes we are entering an era of low returns ... Watch video
Market Thinking - A different way of looking at economies?
First, a confession. Mark may have started his career as an economist but he joins this year's panel not as a chief economist but as the head AXA Framlington Asia. This is to the benefit of the audience ... Watch video
The global and Australian economic outlook
The anchor man of the panel, Saul provides great insights on the domestic economy. And bravely makes the forecast that the Reserve Bank will not cut interest rates this year and that the next move is up ... Watch video
The two-speed economy in reverse
James provides a local perspective and explains to the audience why the mining investment boom is an aberration and it is now a 'return to the old normal'. To view James Bond's slides please click ... Watch video
The major economies in 2015
Is the European economy dead in the water? Is faith on Abenomics waning? Why should investors be more optimistic about the US economy this year? Chris Probyn, the Boston-based chief economist of State ... 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
FEB
28
MAR
10
Adviser Big Day Out Investment Manager Roadshow-Perth
11
Adviser Big Day Out Investment Manager Roadshow-Adelaide
12
Adviser Big Day Out Investment Manager Roadshow-Melbourne
18
Adviser Big Day Out Investment Manager Roadshow-Brisbane
19
Adviser Big Day Out Investment Manager Roadshow-Sydney
News
Bites

$245 (inc GST) for 1 year
 
 
Copyright © 1992-2015 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 AvpJckLM