Chinese policy makes Renminbi bonds an opportunity – DWS

Chinese monetary policy is driving renminbi bond opportunities, Andreas Roemer, head of emerging markets, DWS Investments, has said.

Renminbi bonds performed positively in February, especially in the high yield sectors, following positive news flow and sentiment, Roemer said.

The falling rate of inflation, which is down from 4.5% to 3.2% year-on-year leaves further room for monetary easing on the mainland. It is expected that further easing will bolster growth and allow the renminbi to appreciate.

DWS Invest China Bonds and fund manager Harvest expect monetary easing to continue, with the reserve requirement ratio being cut to around 18%, having already been cut by 50bps to 20.50% in February.

China’s commitment to a shift in its growth mode, away from exports and towards domestic consumption, should support the renminbi, as a stronger currency will allow cheaper imports to grow the domestic economy. China may have plans to loosen capital controls, which would lead to additional investment in the country, while rumours are spreading that the trading band around the official fixing of the renminbi (mainland fixing) may be loosened, bringing more volatility to the renminbi market.

Roemer said: “Short term renminbi disruptions do not alter our long-term view of 3% to 5% appreciation and also fit into our view of a slowdown in the appreciation in 2012 to approx. 2.5%.”

 

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