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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
The CNY NEER has fallen just over 1% from its recent peak. The first chart below plots the CNY NEER and the ratio of China equity performance to global equity performance. Through much of July China equities have unperformed the rest of the world trend. This also caught up with CNY FX performance. As we outline below though, these relative trends could start to stabilize reverse somewhat.
Fig 1: CNY NEER & China Relative Equity Market Performance
Source: MNI - Market News/Bloomberg
- If recessionary fears become a dominant theme in global markets there is certainly scope for these underperformance trends, in terms of relative China asset performance, to stabilize/reverse somewhat.
- To be sure, there are certainly clouds over the China growth outlook given the continued dynamic covid zero strategy. There is also concern around the housing sector, particularly in relation to mortgage repayments.
- Still, data momentum is moderating faster in the EU and US, at least according to Citi EASIs, see the see second chart below. At the margin, stimulus efforts in China could help as well, notwithstanding the challenges outlined above.
- If such trends continue, CNH may outperform in the FX space against higher beta plays and the EUR. Performance against the JPY is less clear given its historical outperformance during global recessionary periods.
- This Sunday's China PMI prints will be the next key update in terms of relative data trends. The market is forecasting resilient outcomes at this stage (manufacturing at 50.4 versus 50.2 in June, 53.9 for non-manufacturing versus 54.7 last month), particularly relative to the EU and US trends from late last week.
Fig 2: Relative Citi EASIs
Source: Citi/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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