As DBS Treasures reports, stabilisation but not normalisation has been our theme from the start of July - our response to the stock market turmoil in China of the past 1-2 months.
And it remains at the core of how we see Chinese equities. So rather than restate my views as published a few weeks ago, it may be worth addressing directly the questions I have received over recent days in response to the huge 8.5% decline on Monday.
Continue to read here ...
As the WSJ reports, the London Metal Exchange, the world’s largest venue for trading metals where $15 trillion of metals was traded last year, is set to accept yuan as collateral for banks and brokers that trade on its platform.
The Chinese currency joins the U.S. dollar, the euro, the British pound and Japan’s yen, which are all currently permissible as collateral on the LME’s platform.
"In the commodities area, it makes absolute sense to start providing renminbi-denominated services," said Trevor Spanner, chief executive of the LME’s clearing house business. “The renminbi is on its way to becoming one of the world’s most widely used currencies” he said.
The yuan is now the fifth most used currency for international payments, ranking number seven a year ago, according to data from the Society for Worldwide Interbank Financial Telecommunication, a provider of payments services.
As WantChinaTimes reports, the International Monetary Fund (IMF) should include Chinese currency renminbi (RMB) into its special drawing rights (SDR) basket as it will help reform the international financial system to reflect the growing weight of major emerging market economies, experts said. In order to serve a stable reference unit at a time of increasing exchange-rate volatility, "the SDR basket would need to be more comprehensive, including the currencies of large emerging economies, beginning with China," the experts said.
The IMF is conducting its five-year review of the SDR basket this year and will decide whether to include the RBM into its basket this fall. At the last SDR review in 2010, the RMB, or the yuan, met the export criterion, but was assessed as not meeting the "freely usable" criterion.
But the IMF has revised its stance on capital controls in recent years and major central banks have been moving toward adopting a mild form of capital controls, according to the experts, suggesting that being "convertible" should not become a key obstacle for the RMB's admission to the SDR basket.
China's market-oriented reform of the RMB exchange rate could also spur investors to advocate for a global asset, they said, noting that the US dollar has appreciated against almost every currency this year except the RMB.
The IMF formally changed its view of the RMB exchange rate in May, declaring that it was "no longer undervalued." Many experts believed that the value of RMB has reached equilibrium.
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