From Investing in Chinese Stocks:
The most important news item of the day.
China regulator denies reports of new FX purchase restrictions
The Shanghai branch of China’s foreign exchange regulator on Tuesday said there have been no changes to rules on individuals purchasing foreign exchange in the city.
The comment was in response to unspecified reports of new foreign exchange purchase restrictions in Shanghai.PBoC: 外汇局上海市分局：个人购汇政策没有任何变化
Wallst.cn: 外管局澄清：“叫停个人投资购汇”相关报道不实
If a rumor about a ban on FX trading is spreading, it means many Chinese are thinking of getting money out and worried about the door closing.
Sentiment has changed.
Meanwhile, from Bloomie:
After Britain’s shock vote for secession, officials in Beijing are contending with a slumping euro and mounting economic uncertainty in Europe, just as a surging dollar raises the risk of capital outflows. That’s forcing a deviation from China’s strategy for much of this year, where authorities maintained limited gains versus the greenback to buoy confidence in the yuan’s stability, while guiding depreciation against the currencies of its trading partners helped bolster exports.
…“The second round of capital outflows has started,” said Kevin Lai, Hong Kong-based chief economist for Asia ex-Japan at Daiwa Capital Markets. “Brexit affects the whole of Europe, and Europe plus the U.K. is quite a big market. You can’t underestimate the impact.”
The PBOC will step in to slow yuan depreciation if needed, said Roy Teo, a Singapore-based strategist at ABN Amro Bank NV, the yuan’s top forecaster. The central bank was seen selling dollars and verbally supporting the yuan in January and August, when depreciation concerns exacerbated capital outflow pressures.
“A similar picture of how they managed to control volatility in the past year will repeat,” said Teo. “In this increased uncertainty it’s also not in the interest of China to devalue because that will magnify capital outflows, which is the last thing they want.”
Yes, it will. Stand by for more shutdowns in the capital account and perhaps a few show trials for trade account mis-invoicers. The collateral damage will be global (and Australian) housing markets.
