China rumour mongering on a Friday
Illustration 1: If CNY trading band is widened .. be careful what you wish for as CNY weakened previously!
Rumour #1: Heading into the G20 Finance Ministers meeting this weekend, the first rumour is that China will probably widen the yuan’s trading band within the next three days after central bank Deputy Governor Yi Gang signaled policy makers will loosen control over the currency. China is always astute in playing its cards leading to any G20 Finance Ministers meeting to avoid being labelled as a currency manipulator and be in everybody’s good books. Asianmacro think this is possible but do be mindful that it can also mean two-way volatility where CNY can also depreciate and not just appreciate in a straight line.
Rumour #2: There is report that MSCI has had a meeting with China SAFE & CSRC in allowing China A-shares to be included in MSCI EM index. With the recent CNY appreciation trend, the talk about pushing back RQFII approval process, the fully deregulation of QFII mechanism and the opening of capital account would still be a medium term event if not a long term occurrence. The source of the rumour can be attributed to this article http://finance.sina.com.cn/stock/yjdt/20130418/213915196798.shtml. It is funny how rumours always starts on Friday and spread like wild-fire by brokers who work their phones tirelessly starting with the calls to their top clients and working down the list. Do note that brokers are not necessarily there to ”warn” you of things but their incentive is to get you to do something and execute / trade more so that volumes are churned and they earn their commission dollars! Asianmacro think this rumour is long in the tooth and probably not today or any more likely in the near future ….
SHCOMP rallied and spike up higher on these rumours and dragged everything else along. I will not be a buyer of these rumours especially #2 …. and will use any stupid spike up in risky assets to sell them short!
P.S. Will be looking at good levels to short CNY NDF and also add to DAX and SPX and AS51 shorts on rally due to the China rumours and feel good.
*Asianmacro is a beach bum managing his own wealth. Besides deciding what to have for lunch (or hitting the gym sometimes), he is mostly found listening to loud music while trading and investing for himself. While every care has been taken in preparing the information in and/or materials, such information and materials are provided “as is” without warranty of any kind, either express or implied. In particular, no warranty regarding accuracy or fitness for a purpose is given in connection with such information and materials. The opinions expressed do not constitute investment advice and independent advice should be sought where appropriate. In no event will Asianmacro be liable to you for any direct or indirect or any other damages of any kind arising from or in connection with your reliance on any information in and/or materials attached herewith. Asianmacro may already have or intend to have a trading or investment position in the financial instruments or products referred to in this communication. This is not intended as an offer or solicitation for the purchase or sale of any financial instrument and Asianmacro may also have interests different from or adverse to your interests.
Asian macro I think the sun has gotton to your head, or maybe you should get your head out the sand about this one.
“Rumour 1”
UBS analysts Manik Narain and Geoffrey Yu who wrote in a note….China will probably widen the yuan’s trading band by the end of the coming weekend after People’s Bank of China Deputy Governor Yi Gang signaled policy makers will loosen control over the currency, according to UBS AG. The move may be announced as finance chiefs from the Group of 20 nations meet in Washington this week,
Please let me know which part of this atrticle is a rumour? see Bloomberg {NSN MLHB1N6JTSEN } for more.
“Rumour 2″ ”
Some have attributed the rise in China today to chat going around that China A’s were to be included in MSCI EM Index. This stemmmed from this article “Global index shakeup looms as China’s ‘frontier’ market opens” BUT someone basically read the headline without reading this ….
“To give an idea of the potential impact, Yang says that under a scenario where A-shares become fully accessible, China’s weighting in MSCI’s emerging stock index, tracked by $1.4 trillion, would jump to 30% from the current 18%.” so it would only be a 12% gain. Not worth the fuss it is creating.”
The above is what this broker wrote to his clients ealrier, don’t assume all brokers dont have integrity, I think I do. I humbly suggest you change your broker sir. Pete
@ HM’s mate, yes, I’m living next to the sea, and yeah, the sun and surf does get to my face pretty much all the time!
I have met up with the UBS strategist Geoffrey Yu a couple of times in the past to hear his thoughts. Must say that he is a smart young man with with good political family connections. But anything which comes from an analyst, strategist or Bloomberg / Reuters news does not make it a fact since it is still a speculation and remains a rumour with regards to CNY widening its band. In fact this rumour was passed around earlier within the fast money community and it explains why USD/CNY NDF is at the low of the year almost pricing the expectation of widening and potential CNY appreciation in the near horizon.
Oh yes, I love my brokers and my brokers love me too … my volumes are pretty high across multiple products and I insist on paying them top dollars so that I am right near the top in the client list. As we all know, it will be difficult for any love to be pass around between brokers and clients when there is hardly any transactions, this is the fact in the markets that will never change whether you get the news first, the best seats for the HK rubgy 7’s, the Singapore F1 paddock club seats, ….. Yes, there are good honest brokers out there like you Pete, but it is the exception rather than the rule, becos’ it is how the system is ingrained into the financial institutions and markets!