Currency risk looks to be back for China investors. The mainland government may be rejecting calls to allow an appreciation of the yuan but many commentators believe the country could be forced to allow a managed float with or without foreign pressure.
One-year non-deliverable forwards - an indicator of the yuan's future value - have strengthened sharply, suggesting the yuan could be worth about 8.105 to the US dollar in 12 months, an increase of about 2.1 per cent.
Equity investors are only just waking up to the implications, with attention focusing on winners and losers from any re-alignment of currency values.
According to a study by CLSA Pacific Asia, China's telecommunications carriers are set to be major beneficiaries, as they would make savings in capital expenditure and increased cash flow.
'Domestic demand-driven companies stand to be the big winners from a stronger yuan, since they carry US dollar revenue, some US dollar costs and possible US dollar debt,' the report said.
Hong Kong-listed Chinese mobile carriers - China Mobile (Hong Kong) and China Unicom - could gain about US$1 billion in cash flow savings from capital expenditure in 2007 if the yuan were fully convertible and had a 15 per cent appreciation against the US dollar.