Analysts on new tariff threat
Publish Date :
2019/08/02 - 10:40
Following Trump's abrupt decision to step up the trade war, China may experience equity of seven dollars sooner than expected, which could also trigger more easing policies by Beijing to support its economy, according to Bloomberg.
The yuan fell 0.76% to 6.9394 against the dollar on Friday morning, the weakest since November, while the Shanghai Composite Index fell 2% to 2851.44, the lowest in two months. Technology stocks also suffered the most, and yields on China's 10-year government bonds fell by 4%, the highest in a month, reaching 3.11%.
Chinese stocks fell as the yuan depreciated as Trump broke market calm.
To summarize from the perspective of analysts:
"Expectations for the yuan to stay stable are no longer there, now that the period of low volatility is over and many traders have to stop their losses. Or, in the coming days, will see the Bank of China's response to the yuan equaling $ 7. "
"The risk of falling 7 (USDCNY) is quite evident and may happen at any time," said Christy Tan, head of market strategy at the National Bank of Australia. The Chinese central bank will not allow any changes in the currency.
Forex Asia strategist at MizuhoBank, Kencheung, said: "Beijing may be tempted to allow further currency declines to support growth. The political emphasis on stability means China is likely to maintain a slowdown amid fears of outflow risk. But we do not expect the yuan to violate the exchange rate immediately. "
The head of market strategy at United Overseas Bank, Koon How Heng, says the Fed is likely to cut further and China's economic growth is likely to fall below 6% next year. He also said: "I am not too worried about China's outflow, but it may be a good stressor to move production capital from southern China to other Asian countries such as Vietnam, Thailand, Malaysia and Indonesia.
"China is likely to focus on supporting domestic growth and the market may expect more liquidity and credit support. Also The yield differential remains favorable for China government bonds.," said Frances Cheung, head of macroeconomic strategy at Westpac Banking Corp.
"New tariffs affect growth prospects more than expected because they include high-tech consumer goods," said market economist at ANZ Bank China, adding that the yield on China’s 10-year government bond could fall another 10-15 basis points to 3.0%.