Yuan Dynamics Facilitate Light Bid

Tuesday’s USD/CNY mid-point fix and touted selling of USD/CNY by state banks seemingly facilitated a light uptick in Chinese equities (CSI 300 +0.9%), although net flows via the northbound legs of the Hong Kong Stock Connect schemes saw some light selling.

• HSBC Asset Management noted that they remain “selectively bullish” when it comes to Chinese equity exposure, as they eye relative valuation metrics (internationally) and the prospect of a Chinese stimulus package. On that front, Finance Minister Liu Kun has pointed to proactive fiscal support being delivered in H223 (broader focus is already on the July Politburo).
• Late Monday saw BBG sources note that “U.S. Treasury Secretary Yellen plans to visit Beijing in early July for the first high-level economic talks with her new Chinese counterpart,” although the talks come as the same sources note that “a Biden administration executive order that would regulate and potentially cut off certain U.S. investments in China is nearing completion and officials are aiming to have it ready as soon as late July.”
• This means that any such trip (which would represent the second such journey made by a U.S. cabinet official in recent times) could be used to set the tone ahead of the passage of the legislation.