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Symbolic Yuan Revaluation Will Occur ‘Soon,’ say JPMorgan, RCM

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Symbolic Yuan Revaluation Will Occur ‘Soon,’ say JPMorgan, RCM
April 20, 2010, 6:08 AM EDT

By Hanny Wan

April 20 (Bloomberg) -- China will “soon” allow a purely symbolic appreciation of its currency, according to JPMorgan Asset Management and RCM Asia Pacific Ltd., who are investing in domestic consumption-related shares to capitalize on the move.

“It’s more of a gesture that won’t result in a significant impact on trade,” Mark Konyn, chief executive officer of RCM, which oversees $11 billion of assets in Asia Pacific, said at a media briefing in Hong Kong today. “It will be nothing dramatic.” China will widen the trading band of yuan before the end of 2010, he said.

Grace Tam, Hong Kong-based vice president of investment services at JPMorgan Asset Management, which manages about $102 billion in Asia-Pacific assets, said at a separate media briefing in the city that a revaluation of the yuan will start “very soon, but not very aggressively.”

China has pegged the value of its currency at about 6.83 yuan to the greenback since July 2008, aiding the nation’s exporters and fueling complaints from U.S. lawmakers that the nation has an unfair advantage in trade.

Speculation that China may revalue its currency escalated this month after U.S. Treasury Secretary Timothy F. Geithner delayed a report on China’s exchange rate and made an unscheduled visit to Beijing.

‘Economically Meaningless’

China’s President Hu Jintao told President Barack Obama in Washington April 12 that China won’t yield to “external pressure” in deciding when to adjust the currency and that any revaluation must be based on China’s “own economic and social- development needs,” the Xinhua news agency cited Hu as saying.

China’s move to revalue its currency will likely be “economically meaningless,” Geoff Lewis, head of investment services at JPMorgan Asset Management, said. “It’s more to be seen as doing something, not for its real impact.”

JPMorgan’s strategy to play the yuan theme is to buy into China’s domestic consumption shares, Lewis said. His view echoes that of RCM’s Konyn, who also said he would invest in yuan assets, particularly through accessing domestic-related stocks. Both Lewis and Konyn didn’t name any specific companies.

The export sector, which RCM rates “underweight,” is an example of an industry that will suffer from potential yuan appreciation, said Konyn.

Twelve of 19 analysts surveyed by Bloomberg last week said the central bank will allow the currency to float more freely this quarter. Five analysts expect it to happen by Sept. 30, and the rest see the move by year-end, the survey showed. Eleven ruled out a one-off revaluation. Fifteen predict a wider daily trading range.

The trading band may be widened to between 0.75 percent and 3 percent either side of the central bank’s daily reference rate, the survey showed. In May 2007, the central bank widened the daily trading band to 0.5 percent from 0.3 percent.


“soon” “soon” “soon” “soon” “soon” “soon” “soon”

JUST DO IT!!!!!!!!!!!!!!!! BUT at least it's coming from JPMorgan!!

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