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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
CNH
China equities are down again today (off -1.5 to -2%), continuing to unwind some of the recent outperformance trend, see the first chart below. Covid concerns are weighing with a fresh city put in lock down, while Shanghai has found a few more cases outside of quarantine. The market is looking through the overnight bumper credit figures, with the dynamic covid zero strategy continuing to raise questions over the growth rebound.
- CNH has still been outperforming, but it is starting to feel greater pressure from higher USD levels. Interestingly, the CNY TWI in NEER terms is not too far away from recent YTD highs, see the other line on the first chart below.
- USD/CNH has now risen above 6.7450, which is nearly 1% above the lows from the end of last week. We are back at highs from mid June. Just below the 6.7600 is the next level that could be eyed, and then above 6.7800 beyond that.
Fig 1: China Equities Unwinding Some Recent Outperformance, FX Next?
Source: MNI - Market/News/Bloomberg
- Higher USD/CNH levels are spilling over to the rest of the USD/Asia FX complex. Spot USD/KRW is trading at fresh cyclical highs, above 1314, while USD/INR is closing in on 79.60, another record high. THB and PHP have also dropped further on the day.
- Not surprisingly, inflows into China equities are also losing momentum, see the second chart below.
- Inflow momentum for the rest of EM Asia was on a slightly better trend, but this may not be sustained. If this eventuates, it creates another negative feedback loop for regional FX. Net outflows from South Korea today (-$171mn) are on track for the largest since the start of the month.
Fig 2: China Equity Flows & Rest Of EM Asia Equity Flows (Rolling Monthly Sum)
Source: MNI - Market/News/Bloomberg
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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