Stronger more stable Yuan should appeal to international investors

Higher yields, easing currency concerns, and further opening up of the domestic market are likely to prompt rising investment into China’s US$9 trillion onshore market by foreign investors in the coming months, according to analysts.

Bond yields on China’s onshore market have risen back to their levels of late 2014, driven by the rebound in inflation and commodity prices in November and December, and accelerated since March as interbank rates surged and the regulator cracked down on arbitrage and risky lending practises.

Yields on benchmark 10-year Chinese government bonds is now up about 100 basis points to above 3.65 per cent from its low in late October, and corporate bond yields are on average up by about 200 basis points.

Onshore Chinese yuan, meanwhile, has touched its highest level at above 6.75 yuan against the US dollar in nearly seven months, after China’s central bank set the yuan midpoint at the strongest point since November, in a strong show of force against short sellers.

“Yuan bears will either go into hibernation or take to the sidelines licking their wounds for the foreseeable future,” said Stephen Innes, senior trader at Oanda.

South China Morning Post

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Stephen Innes

Stephen Innes

Head of Trading APAC at OANDA
Stephen has over 25 years of experience in the financial markets and currently based in Singapore as the Head of Trading Asia Pacific with OANDA. Stephen's market views focus on the movement of G-10 and ASEAN Currencies. His views appear in Bloomberg, CNBC.Reuters, New York Times WSJ and the Economist. His media appearances include Bloomberg TV & Radio, BBC International, Sky TV, Channel News Asia, ASTRO AWANI and BFM Malaysia. Stephen has an extensive trading experience in Spot and Forward FX, Currency and Interest Rate Futures, Money Market Derivatives and Precious Metals. Before joining OANDA, he worked with organisations like Nat West, Chemical Bank, Garvin Guy Butler, and Sumitomo Mitsui Banking Corporation. Stephen was born in Glasgow, Scotland, and holds a Degree in Economics from the University of Western Ontario.
Stephen Innes