'Yuan policy move may boost China's stocks'
Monday, 21 June 2010
BEIJING, June 20 (Bloomberg): China's pledge to make the yuan more flexible may boost shares denominated in the currency when markets open tomorrow, China International Capital Corp (CICC) and Societe Generale SA said.
"If it leads to appreciation for the yuan, it's good news for the market," Hao Hong, global equity strategist for CICC in Beijing, said in a report today. "Investors will want to get into Chinese assets because they will be worth more. It will also deflect political criticism and help stem inflation."
The People's Bank of China said yesterday that it will "increase the renminbi's exchange-rate flexibility" after the economy improved. Officials have kept the yuan, also known as the renminbi, at about 6.83 per dollar since July 2008, aiding the nation's exporters and fuelling tensions with trade partners.
A stronger yuan would aid Chinese companies by boosting their purchasing power, while the likelihood of the currency appreciating is an incentive for foreign investors to buy yuan- denominated stock, Glenn Maguire, a Hong Kong-based economist for the French bank, said in a phone interview today.
"It's probably going to be a positive for the A-share market," Maguire said. "It makes A-share valuations look more attractive," he said, declining to estimate how much shares may gain. The local-currency A-shares rose in 2005 when China revalued its currency, he added.
The Shanghai Composite Index has tumbled 23 per cent this year as the government pares stimulus measures and Europe's sovereign-debt crisis adds to the risk of a renewed global slump.
In 2005, the benchmark, which covers both A shares and foreign- currency B shares, rose 2.5 per cent on July 22, the day after the government revalued the currency.
"If it leads to appreciation for the yuan, it's good news for the market," Hao Hong, global equity strategist for CICC in Beijing, said in a report today. "Investors will want to get into Chinese assets because they will be worth more. It will also deflect political criticism and help stem inflation."
The People's Bank of China said yesterday that it will "increase the renminbi's exchange-rate flexibility" after the economy improved. Officials have kept the yuan, also known as the renminbi, at about 6.83 per dollar since July 2008, aiding the nation's exporters and fuelling tensions with trade partners.
A stronger yuan would aid Chinese companies by boosting their purchasing power, while the likelihood of the currency appreciating is an incentive for foreign investors to buy yuan- denominated stock, Glenn Maguire, a Hong Kong-based economist for the French bank, said in a phone interview today.
"It's probably going to be a positive for the A-share market," Maguire said. "It makes A-share valuations look more attractive," he said, declining to estimate how much shares may gain. The local-currency A-shares rose in 2005 when China revalued its currency, he added.
The Shanghai Composite Index has tumbled 23 per cent this year as the government pares stimulus measures and Europe's sovereign-debt crisis adds to the risk of a renewed global slump.
In 2005, the benchmark, which covers both A shares and foreign- currency B shares, rose 2.5 per cent on July 22, the day after the government revalued the currency.