J.P.Morgan Cognisant Of Risk Of CNY Weakness

J.P.Morgan note that "weak equity sentiment amidst sharp price corrections and lingering concerns over further regulatory crackdowns could turn equity flows from a tailwind for CNY FX in H121 to a headwind over the short-run. Although corporate fundamentals are still solid in many areas, market confidence may not be restored without a clear signal of support from the authorities. Domestic capital outflow risk is much lower than in 2015, given far more tools at the PBoC's disposal to manage outflows, but the starting point of elevated CNY CFETS Index against the backdrop of margin pressures facing Chinese firms means that there may not be any immediate willingness to stem FX weakness."