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Honest Information, Profitable Trading

Durudarshan - Investment Analysis

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A reading of the Yuan devaluation

Posted on August 12, 2015 at 2:32 PM
The 1.9 percent 'one-off' devaluation of the Chinese Yuan against a basket of currencies is said to have been actioned to (a) facilitate the Yuan's inclusion in the basket of currencies that the IMF uses to create the Special Drawing Rights; and (b) primarily, to aid Chinese exporters offer better deals to people importing from China.  Imports from China still remain competitive, although cost of production and labour are rising all the time; but in no way are they near those of U.S., Japan or Europe, and are therefore likely to continue to enjoy big markets for their products.  So reason to try and spur growth in this sector is the slowdown seen in manufacturing and production most recently, and this combined with poor export figures have caused this spur in activity and policy adjustments. 

The recent falls in the Chinese stockmarkets have left a bad feeling for a lot of investors, people who reluctantly and then enthusiastically took up stockmarket speculation, believing it to be the quick way to riches.  Now they have the experience that what looked like quick riches on paper have reduced their capital, wiping some out completely. 

There seems to be substantial housing units, built to high European standards, waiting for buyers.  The People's Republic will have to design measures to enable people buy those properties. 

Some while ago, when the Hon. Xi Jinping was a rising star in his Party, he is credited with creating policies which enabled create growth and much happiness for the people.  Today as he is in charge of heading such an agenda, I can only imagine good and positive measures materialising in the near-term.

The recent fall in commodities prices may be something that will turn when the Chinese market is ready.  Once prices hit what can be perceived as 'bottom', there may be steady or frenetic activity to stock up and create a boom. 

It seems like the new way to play is to see what may be most profitable.  But that how it has always been for individual traders.  Played on a macro level, it will have ramifications that will impact a lot of economies. 

The world is in for some very interesting times, and certainly challenging conditions at present.


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Growth in the U.S. economy and in Europe can be seen to continue, as the U.S. has a Debt Ceiling agreement in place to March 2016 (which has superseded the one that was renewed at September previously; so I imagine the call at September will be a formality) and the Greek bailout will now facilitate the rollout of the Eurozone stimulus at a steady pace. 

It remains for Russia to create peace over Ukraine.  Good relations with the West over this issue would see the Rouble strengthen as it did previously, and perhaps help Russia avert a recession at home, which the sanctions were affecting; renewed sanctions and strained relations in the region are just so unnecessary. Certainly they are painful and have hurt people; a resolution on this issue would be best for all people.


I send you my good wishes.

Kind regards,

Duru-darshan





 






Categories: The Yuan adjustment

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