Why don't foreigners like to treat themselves?2023-07-07
Korean Entrepreneur Seon Woo-shin's "Money Sucking Dafa"2023-07-07
Chinese investors are now facing a complex situation rarely seen in history. The future trend of the RMB exchange rate is not yet clear, and the European debt crisis has started to spread from Greece to other countries, pushing the value of the euro to the bottom. Domestic investors in the face of the ups and downs of the foreign exchange market at the same time, will also be subjected to inflation expectations and domestic capital market regulation test. People seeking to preserve and increase the value of their assets seem to have suddenly realized that a clear investment direction and a clear asset allocation plan is a "luxury" in the period of financial market shocks.
In such a situation, is holding foreign exchange investors should be how to act? Camera action or to not change to cope with the changes? In the investment market full of liquidity flood, relatively good investment space and timing where to hide? Foreign exchange assets and what are the temptations?
RMB appreciation pushed back
The pace of change in the RMB-dollar exchange rate has become more variable with the escalation of the European debt crisis. Before the outbreak of the debt crisis in Europe, the Chinese monetary authorities to start the pace of appreciation of the yuan, mostly focused on the specific time point and the magnitude of the appreciation of the discussion; but since the debt crisis in Europe, the short and medium term can be appreciated, but has become the focus of debate.
Huo Deming, a professor at the China Center for Economic Research at Peking University, told reporters that the European debt crisis, although it currently looks fraught, but it is only a small twist in the context of the global economic recovery, and the ripples caused by the exchange rate market are not harmful.
"There will also be a slow appreciation by the end of this year." Huo Deming said. However, he also admitted that the emergence of the debt crisis in Europe will lead to China's exports in Europe to encounter a cold market, thus making just stabilized exports may again face a dilemma.
The stabilization of the trade situation is crucial to the continued growth of the Chinese economy in 2010 and to the advancement of internal economic restructuring. With most countries in the world gradually getting out of the crisis quagmire, the global market demand is slowly picking up, but it is no longer possible to return to the market capacity before the crisis.
Looking at China's trade data since 2010, it can also be seen that although the year-on-year strength, but the recovery of the steps can be described as arduous, not optimistic. 2010 China's trade surplus narrowed in January, into March was the first deficit in 70 months. April's trade surplus is again only a small surplus, China's Ministry of Commerce of the full year of the trade situation, the prognosis is that "The trade surplus will fall sharply".
Against this background, Chinese exporters are very sensitive to fluctuations in the external demand market and exchange rates. The debt crisis that started in Greece has now spread to Spain, Portugal and other major European countries. In the process of the euro was a strong sell-off, losing ground.
As of May 20, Beijing time, the euro against the dollar exchange rate has set a new record since the lowest record in four years, while the dollar index soared again, once touched 87.36, reaching the highest value in 14 months. At the same time, the euro against the yuan exchange rate also fell. As of May 20, the exchange rate of 1 euro against the yuan has fallen to 8.4451 yuan from about 10 yuan a few days ago.
The debt crisis that took place on the other side of the Asian and European continents has brought the double negative impact of shrinking demand and rising exchange rate costs to the export enterprises in China's eastern coastal areas. If this time to start the appreciation of the yuan against the dollar, then indirectly caused by the yuan against the euro more substantial strengthening, is tantamount to adding to the woes of export enterprises.
"As a result, the Chinese monetary authorities have decided to push back the appreciation of the yuan." Hodgson said, "What was previously considered to be the right time may not be now." He believes that on a full-year basis, the pace of yuan appreciation will likely begin to be considered for initiation after the European debt crisis, when the dollar's temporary strong position against the euro will also come to an end. Before the end of the year, the yuan will realize a small appreciation of 1-2 percentage points against the dollar.
Guotai Junan chief economist Li Xunlei expressed a more pessimistic view of the euro exchange rate. He pointed out that one of the core issues of the European debt crisis is that most of its debt is short-term debt. And an important measure of short-term debt, not in its number of how much, but in the strength of its liquidity. "The reason why the debt crisis will appear in a chain reaction between several countries and the situation aggravated, mainly in which several European countries are trapped in the short-term debt-servicing capacity are relatively weak."
This situation is in stark contrast to U.S. debt. "One of the characteristics of U.S. debt has always been that it is large in volume but also very liquid, so it is relatively safe, and people are more willing to hold U.S. debt in times of market shocks." Li Xunlei said, "This important difference leads to the strong position of the dollar against the euro will not disappear in the short term." If the international exchange rate market presents such a situation, then taking into account the affordability of export enterprises, the starting point of the appreciation of the yuan against the dollar may still be difficult to predict.
Su Jian, a professor at Peking University's School of Economics, argued in a press interview that "in the long run, the weakening of the dollar against the yuan will be the general trend, and the appreciation of the yuan is only a matter of time."
A higher expectation of the RMB exchange rate system is to realize the RMB against the dollar in the future within a reasonable range of more flexible fluctuations. National School of Administration, deputy director of the Decision-making Consulting Department, the former China Foreign Affairs Bureau in Hubei Province, deputy director of the Bureau of Chen Bingcai told reporters that the current appreciation of the yuan is expected to be so strong, mainly because "should be appreciated under the circumstances did not rise."
"The exchange rate system needs to be changed, the yuan against the dollar exchange rate to be able to rise and fall, up and down fluctuations 4%-5% are very normal amplitude." Chen Bingcai said, "the change will be seen at the beginning of the appreciation of the yuan, but appreciation expectations are all released in the future is a reasonable range of fluctuations within the range can rise and fall trend."
Convert it to RMB?
For many years, the RMB has played the role of a currency that protects value and hedges against risk during periods of financial market turbulence. As a Chinese investor, it seems to be a good sense of security to switch back to the local currency at a time when the exchange rate market is unpredictable.
Fodermin said that freeing up the US dollars in their hands into yuan is the best option at the moment for those seeking to preserve the value of their money in a secure manner. "The foreign exchange market has always been one of the biggest headaches for economists because it always changes unexpectedly, and no one can always accurately anticipate how the exchange rate will move or guess when the government will appreciate."
Under such circumstances, I am afraid that taking a medium- to long-term view is the safest and most labor-saving option for investors. In his opinion, since the appreciation of the RMB is only a matter of time, it would not be a bad idea to hold the RMB from now on.
In addition, for those who plan to travel to the United States in a few months, the hands of the U.S. dollar temporarily converted to the yuan is a good choice, if the yuan in the period of time to start the cycle of appreciation, then the purchasing power in the United States can be increased.
Currently, not only individual investors in the domestic market are converting dollars into yuan, but institutional investors and international lobbyists are also making moves. The inflow of dollars into the Chinese market, including not only through trade, direct investment in China into the hot money, but also China's local institutions to take advantage of the appreciation of the yuan is expected to carry out the asset transfer. Chen Bingcai said that recently some domestic commercial banks are transferring their overseas dollar assets to the domestic market through advance remittance, waiting for the opportunity of appreciation.
Individual investors or holders of foreign currencies may encounter a more complicated situation when faced with the problems of the euro. For holders of the euro, direct selling is obviously the most rational choice at the moment. Since November 2009, the euro against the Chinese yuan exchange rate has fallen to 19%, which means that in November last year, still hold 1,000 euros (more than 10,000 yuan) investors, its assets have been "evaporated" close to 2,000 yuan. But for people who are going to Europe to study or travel, will face a dilemma at the point of time to choose. Ms. Zhu, who intends to use her annual leave to travel around Europe, has recently encountered such confusion. When to take annual leave? The judgment of this time to follow the euro exchange rate.
As a result of the European debt crisis, the euro has taken a sharp turn for the worse against the dollar, while the movement of the euro against the Chinese yuan fluctuates indirectly through the exchange rate between the dollar and the Chinese yuan. What one needs to determine is whether the euro has fallen to its lowest point at this point. Obviously, if a certain investor sells the euro currency at its lowest point and converts it into US dollars or Chinese yuan, he or she cannot help but regret it in the face of the exchange rate inflection point that immediately follows.
In this regard, Li Xunlei believes that the strength of the dollar against the euro will continue to maintain. Beijing time on May 20, the euro against the dollar exchange rate of 1 euro to 1.2367 U.S. dollars. Chen Bingcai predicted that the euro exchange rate has not fallen to the bottom, it is possible to fall to the low point in 2002, that is, below 1.2 U.S. dollars. This view is similar to the current part of the international institutions on the euro trend forecast.
UBS, Merrill Lynch, the Royal Bank of Scotland and other financial institutions have recently given the euro is expected to maintain the exchange rate between 1.15 to 1.26 dollars. While the Bank of Paris is predicted in the first quarter of 2011, the euro and the dollar exchange rate will be adjusted to 1:1.
With such projections, converting euros to yuan is not a relatively sound strategy.
Holding RMB or investing?
After converting the foreign exchange funds into RMB, some people will choose to deposit the funds in banks; however, others who are not willing to be left alone will look for investment directions in the domestic market in order to preserve and increase the value of the funds.
In this regard, Mr. Huo said that "cash is king" is the wisest choice at this point in time. The property market is in the stage of frequent policy introduction, there are many uncertainties; and the tightening trend of monetary policy on the stock market may continue.
He pointed out that the second-quarter economic data and monetary policy wind changes, will become the stock market stabilized recovery signal. The year-on-year CPI growth rate in April this year reached 2.8%. Huo expects that if the GDP growth rate in the second quarter remains stable, while the year-on-year CPI increase does not exceed 3%, then the monetary authorities will be less worried about heavy inflation, when a series of regulatory tools such as central bank bill issuance and open market operations will likely be slowed down.
"There is quite a solemn atmosphere in monetary policy at the moment." Fok Tak Ming said, "But this is also the best time to invest in the market, as a turnaround could happen at any time. All investors have to do is to prepare the yuan and hold the currency when data and policy signals appear."
For the real estate market, Li Xunlei pointed out that even if the control measures have come to an end for the time being, the key cities of the prices to avoid a sharp decline, the property market is not a good investment direction.
"China's property market, especially the real estate market in key cities that surged in the early stages, has almost reached the limit of its ability to absorb yuan." Li Xunlei said. Excluding those short-term speculation of a sum of money, the addiction to go, most of the own savings investors, should change the property market as a long-term investment areas of thought.
The United States, Japan, the real estate bubble burst on the surface is a financial phenomenon, but the root cause behind it is closely related to the real economy level, the core problem lies in the aging of the population, the increasingly serious polarization of wealth and other factors brought about by the lack of domestic market demand.
In Li Xunlei's view, some Chinese cities are gradually stepping into this stage. 2015 to 2016 may become the key cities of the property market investment value of the trend inflection point, which means that if the property market control is difficult to see the effect, then continue to inflate the bubble will likely burst at this stage.
"It is meaningless to emphasize how strong the rigid demand brought by the urbanization process to these cities." He pointed out that due to the previous part of the city housing prices rose too much, has been the next years of urbanization to increase another 10 or so percentage points driven by the space to raise housing prices in advance "occupied". The current housing prices have reached the level after full urbanization. Therefore, the future of some cities have not offset the negative factors of aging boost.
For most people in mind the best anti-inflation tool - gold, Li Xunlei is not entirely optimistic. He pointed out that gold as a precious metal, has a better function of value preservation, but does not have the function of investment appreciation. "In the case of a relatively high inflation rate, counting on gold price increases to realize the value of assets to run over the CPI, is unrealistic." He said, "Moreover, the gold price has now realized the value-added cycle that lasted for many years, and is currently at an all-time high, and lacks a strong impetus to continue to rise."
Chen Bingcai, on the other hand, pointed out that the current domestic capital market and the financial market on the bubble is more serious, and most people want to through a variety of arbitrage activities in the short term to make huge profits, this line of thinking itself for investment is quite dangerous. "Some areas are the market for lunatics." Chen Bingcai said bluntly.
Whether it is the subprime crisis in the United States, or China's current existence of some "crazy market", the fundamental reason for the accumulation of bubbles in the real economy is underinvestment, the funds flocked to the pure value-added speculation. "So in my opinion, if the hands have enough idle yuan, should consider investing in industry. Especially in areas with a background in emerging strategic industries, such as low-carbon technology."
The lure of the dollar?
If holding RMB is by far the most certain option for those looking for stability, switching to RMB is not the most attractive option for those bent on asset appreciation and high levels of ROI.
On the one hand, it is difficult to grasp the timing of RMB appreciation; on the other hand, it is difficult to find high-return investment direction in the current domestic market, and after the funds are converted to RMB, they still have to bear the "depreciation" brought about by inflation and negative interest rates.
Well, if the current direction of RMB investment lacks effective appreciation channels, then the dollar assets or certain foreign currency assets can bring more choices? Explore the significance of this issue, not only in the foreign exchange market arbitrage this direct and simple. The financial crisis aftershocks continue, the exposure of its deep economic problems, as well as the interests of the global economic rebalancing triggered by the demand is slowly fermenting. These issues, will make the country more closely involved in the foreign exchange market and international investment. Renminbi, U.S. dollar, euro, Australian dollar ...... what proportion of their respective asset allocation in the Chinese people? Where will these assets be invested? These may become the future of Chinese investors need to face the long-term problem.
In Li Xunlei's view, the U.S. dollar remains one of the most seductive and important currencies. From the perspective of exchange rate market changes, perhaps the charm of the dollar itself is not so great, but its physical support surface - the U.S. economy, may be brewing numerous investment opportunities. After the deleveraging process from 2008 to 2009, the U.S. financial markets and capital market bubbles fully extruded, is at the bottom of the asset prices for the global dollar holders to bring a "bottoming out" of a good opportunity.
Li Xunlei believes that those investors who have enough dollars and want to maximize asset appreciation should continue to hold dollars and buy dollar-denominated assets, such as buying a house in the United States. The Federal Reserve recently released its latest GDP forecast for 2010, which is expected to rise 3.2% to 3.7% year-on-year. This is an improvement over the 2.8% to 3.5% forecast for the first quarter, reflecting the pace of the U.S. market rebound. The gradual strengthening of the real economy will also give more impetus to the capital market to enter the appreciation cycle. At the same time, Japan, Australia and other countries in the property market are worthy of attention.
Japan's real estate market policies may be more attractive than those of the United States from the perspective of reducing investment costs. Although real estate prices in the U.S. are currently low, its property and vacancy tax rates are high and enforcement is harsh. Comparatively, Japan's property tax rates are lower, making it more cost-effective for investors who are looking to add value to their properties.
Focusing on overseas property markets is not a short-term bottoming out momentary move. In Su Jian's view, the financial crisis, accompanied by the process of deleveraging in foreign markets, as well as the massive release of liquidity in the domestic market and the accumulation of bubbles, will inevitably promote a more frequent flow of funds to start a wider range of capital investment.
Su Jian further said that in the long run the return on investment in the Chinese market will be much higher than in developed economies such as Europe, America and Japan. However, China is structurally suffering from a lack of domestic demand and insufficient investment, which will probably be an obstacle to maintaining high investment returns in the future. "Promoting urbanization and lowering high house prices to unleash consumer demand will become important measures to expand domestic demand and drive benign investment in the Chinese market in the future."
Behind the flow of funds, accompanied by the migration of population, labor and talent is likely. Li Xunlei believes that the aging of the population, including countries such as the United States and Japan, will become an important factor restricting their long-term future growth, and the lack of domestic demand and investment is a problem that is difficult to solve by relying on the existing residents of their own countries. "I predict that this financial crisis will bring about a trend of further relaxation of immigration policies in some countries in the near future. Through more relaxed investment policies, the population will be attracted to energize the economy along with capital."