Views on Yuan Movement Gather Momentum

123jump.com Staff
08 Apr, 2010
New York City

Currency traders are taking a view that China is preparing to let the renminbi trade higher ahead of the meeting between President Hu Jintao and President Barack Obama next week. China Life shares dropped after the insurer offered a cautious outlook.

[R]6:00 AM Hong Kong, China – Currency traders are taking a view that China is preparing to let the renminbi trade higher ahead of the meeting between President Hu Jintao and President Barack Obama next week. China Life shares dropped after the insurer offered a cautious outlook.[/R]

Currency markets are increasingly factoring a slow but steady rise in the renminbi after a 75 minutes meeting between U.S. Treasury Secretary Timothy F. Geithner and Vice Premier Wang Qishan at Beijing International Airport.

U.S. lawmakers have been vocal in asking China to let its currency fluctuate in a wider band and strengthen against the dollar. They believe that stronger yen will increase exports from the U.S. and lower China’s trade deficits with the nation.

However, stronger renminbi will also make fewer dollars available from the Chinese central bank to purchase U.S. government debt.

China has been staunchly defending its currency for the last five years and with each passing year the cost of holding the currency is increasing. China spent just over 9.1% of its gross domestic product to defend its currency, a severe cost to the nation.

Renminbi futures contract increased 0.3% in value to 6.621 against one dollar after New York Times reported that China is “very close” to let its currency strengthen without citing any person.

The People’s Bank of China offered smaller amount of 3-year bills and larger debt offering of 3-month bills.

Central bank sold 75 billion yuan bills on Thursday that yielded 1.408% and sold 15 billion yuan that yielded 2.75%.

Hang Seng index in Hong Kong decreased 61.73 or 0.28% to 21,867.04, and CSI 300 index in China lower 40.20 or 1.19% to 3,346.74.

Shanghai Movers

China Life Insurance Company Limited decreased 2.3% to 28.32 yuan after the life insurance company reported net income of 32.88 billion yuan, a rise of 72% from the 19.14 billion yuan a year earlier.

China Southern Airlines Company Limited added 5.5% to 8.19 yuan after the commercial airline signed an agreement with a unit of Danzas Holding AG to cooperate on cargo services in 19 Chinese cities including Guangzhou, Shanghai and Hangzhou, according to a statement.

Tianjin Port Company Limited rose 0.8% to 11.90 yuan after the company said 2009 profit fell 32% from a year earlier to 643.6 million yuan.

HK Movers

China Overseas Land & Investment Limited dropped 2.6% to HK$17.62.

China Petroleum & Chemical Corporation fell 1.9% to HK$6.43.

CNOOC Limited the offshore energy explorer dropped 2.0% to HK$13.64.

China Mobile Limited rose 1.8% to HK$77.80 after the Far EasTone Telecommunications Co Ltd yesterday inked a memorandum of understanding with China’s largest telecom carrier to build fourth-generation testing networks in Taiwan.

Hang Lung Properties Limited the developer slipped 3.0% to HK$31.55.

PetroChina Company Limited dropped 0.8% to HK$9.32 and the oil refiner plans to shut down a 1.4 million ton-per-year fluid catalytic cracker for about one-month of regular repairs from late April according to media reports in Shanghai and report on Bloomberg.