Coronavirus: China could become new investment safe haven as stocks, yuan rally while global markets suffer
- China stock market has risen 10 per cent in the last month, while yuan has also gained despite the economic damage from the coronavirus outbreak
- Investors may see yuan assets as attractive purchases with coronavirus cases seemingly nearing a peak in China but rising rapidly elsewhere
An ongoing Chinese stock market rally and a yuan exchange rate rebound over the last week have fanned speculation that, as the coronavirus appears to be coming under control, China could become a new safe-haven for investors with other major economies now the ones reeling from the outbreak.
The yuan’s exchange rate has also gained 0.73 per cent against the US dollar, pulling back sharply from the key psychological line of 7.00, and making it the second best performing among 11 major Asian currencies.
Michael Metcalfe, global head of macro strategy at State Street Global Market, said that “it is a curious fact that Chinese equities have outperformed global markets, even though Chinese growth, initially at least, seemed certain to take the biggest hit.”
Since trading resumed after the Lunar New Year, China’s stock market attracted 850 billion yuan (US$122 billion) of stock purchases from Hong Kong via the Shanghai and Shenzhen Stock Connect channel in February, up from 506 billion yuan in January and 450 billion yuan in December.