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The yuan is set to bounce as the government’s efforts to boost consumption bear fruit and the lure of higher-yielding assets abroad diminishes, according to the offshore wealth arm of Citic Securities Co. The currency is likely to gain 5% versus the dollar over the next year or two as economic data start to show measures to bolster demand are working, said Matthew Chan, head of product and investment solutions at Citic Securities Wealth Management (HK) Ltd Signs the Federal Reserve will cut interest rates next year will also encourage capital flows back to China, he said.
“We are super bullish on the renminbi because we think it has bottomed,” Chan said in an interview. “We have high hopes, now we just need to be patient for that to come into effect.”
The onshore yuan has slumped 5.2% this year, the worst-performing Asian currency after the yen and Malaysian ringgit. The currency depreciated to 7.351 versus the greenback, the weakest since December 2007, before recouping some losses when financial regulators said they would take action to correct one-sided moves.
Yuan-denominated assets are also set to benefit even if the People’s Bank of China decides to lower rates again as that’s likely to lead to a stronger economic performance and improve sentiment, Chan said.
“The renminbi is a good position to invest,” he said. “We believe there will be some opportunities given the possibility of the US-China interest-rate differential becoming more stable.”