The likelihood that the mainland will devalue the yuan has diminished from earlier this year and the possibility is low in the next several months, according to Standard & Poor's Greater China director Lincoln Chan. Mr Chan was speaking at a seminar on credit rating attended by bankers, financiers and analysts from the mainland. 'The possibility [of a devaluation] is still there but has fallen. Over the next several months, the chance is small,' Mr Chan said. 'As for next year, we must look at how the domestic economy develops and many other factors, including negotiations to enter the World Trade Organisation,' Mr Chan added. 'The government is putting a great deal of effort into the negotiations and will not move in other areas. After the negotiations are finished, it is free to do other things,' he said. Most economists believe Beijing will not devalue the yuan while the WTO talks are going on, since that would send the wrong message to WTO members, and it has frequently boasted of how responsible it has been towards its Asian neighbours during the crisis, in keeping its currency stable. Asked whether it was becoming easier to rate the shares of mainland state firms, Mr Chan said that, as in other developing countries, there were problems with information and other aspects. 'Things have improved over the last one-two years and we hope for further improvement in the future.' His colleague Stephen Yao, managing director of fund services, presented a paper on rating mutual funds. He said pension funds had enormous potential in Asia because many countries were reforming their pension systems to put more private money into them and governments welcomed such investment because it was long term and good for social stability. Over the past two years, the mainland had set up 20 mutual funds with capital of 41.8 billion yuan (about HK$39.01 billion), of which 15 had listed, he said. The index of the mutual funds outperformed the mainland's two stock markets last year, rising 7.47 per cent over the year, while Shanghai fell 13.9 per cent and Shenzhen 27 per cent. As of the end of last month, net assets of two of the 15 had risen more than 50 per cent from their initial value, three had risen 40 per cent and four 30 per cent, Mr Chan said. Standard & Poor's has not had the opportunity to rate these mutual funds.
