Advertisement
Macroscope | US-China trade war sends unsentimental markets hunting for winners to get behind, and losers to ditch
Neal Kimberley says the US-China trade war will affect goods, services and currencies across the globe, but there are also potential opportunities for investors in ‘safe havens’, and we can count on markets not to let a crisis go to waste
Reading Time:3 minutes
Why you can trust SCMP
“You never want a serious crisis to go to waste”, said former US president Barack Obama’s chief of staff Rahm Emanuel back in 2008. In truth, markets never do. And because markets understand China’s importance to the world economy, there’s a lot of time and energy being expended on how best to play the deterioration in China-US trade relations.
That’s not to say markets are callous, merely that they aren’t paid to be sentimental, they’re paid to make money.
One obvious market focus is the yuan. If it chose to, China could allow the yuan to depreciate materially further than already seen, in an attempt to focus US minds. Cheaper Chinese exports, in US dollar terms, would certainly get Washington’s attention but it probably wouldn’t be in Beijing’s longer-term interests to pursue that option.
Advertisement
Such a move, aside from potentially triggering undesired capital outflows and increasing imported inflation, wouldn’t sit well with China’s intention to establish the yuan as a leading international currency that reflects the country’s economic clout.
With that in mind, the attention of currency market participants might alight on other currencies that could also be vulnerable amid worsening China-US trade tensions.
Watch: Why Hong Kong pegs its currency to the US dollar
Advertisement
Select Voice
Select Speed
1.00x