Yuan’s depreciation expected to continue due to monetary policy divergence between China, US – Citi Research
FOREX VIEWS & ANALYSIS
Yuan’s depreciation expected to continue due to monetary policy divergence between China, US – Citi Research
FOREX VIEWS & ANALYSIS

Yuan’s depreciation expected to continue due to monetary policy divergence between China, US – Citi Research

 

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The yuan’s depreciation against the US dollar is expected to continue as the Chinese government in on the path of monetary easing while the US Federal Reserve ins tightens its policy, Citi Research said in a note.

In the short term, the weakening of the yuan is most positive for resource stocks because metal sales are denominated in the dollar, while airline stocks with revenues coming from overseas and some conglomerates will be the most negative, as the latter have greater exposure to EUR- or USD-denominated debt, it said.

In terms of China equity strategy, Citi remains most concerned about China’s slow economic recovery, the yuan depreciation and US-China relations, and preferred the A-share market to the H-share market. In terms of sectors, the broker suggested an overweight on internet, technology, consumer and transport sectors.

Citi maintained Chow Tai Fook, BYD Company and Sands China as its H-share top picks, and added AIA, Trip.com and Travelsky Tech due to the positive outlook on the companies and their sector.