Does the yuan hold the key to an uninterrupted rally in China’s stock market this year?
- Analysts say yuan’s recent appreciation against the US dollar is overdone
- A stronger yuan will boost selective equities and hit others
As Chinese equity benchmarks entered a bull market this week, the yuan too strengthened to a seven-month high against the dollar. Now investors are sizing up the impact of the yuan’s appreciation on the fate of A shares this year.
The trend of a weakening dollar is traditionally viewed as favourable to Asian emerging market equities. In fact, various banks and asset managers had already made calls last year on the dollar peaking in 2019.
On Monday, the yuan rose as high as 6.6718 yuan against the dollar, the strongest level since July. Coinciding with such gains was a 6 per cent surge in the CSI 300, which tracks blue chips listed on the Shanghai and Shenzhen bourses, taking the index’s year-to-date gains to over 25 per cent.
The gains in equities and the yuan came after US President Donald Trump confirmed an extension to the March 1 deadline to resolve the seven-month old trade war with China.
