Illustration 1: If CNY trading band is widened .. be careful what you wish for as CNY weakened previously!
Rumour #1: Heading into the G20 Finance Ministers meeting this weekend, the first rumour is that China will probably widen the yuan’s trading band within the next three days after central bank Deputy Governor Yi Gang signaled policy makers will loosen control over the currency. China is always astute in playing its cards leading to any G20 Finance Ministers meeting to avoid being labelled as a currency manipulator and be in everybody’s good books. Asianmacro think this is possible but do be mindful that it can also mean two-way volatility where CNY can also depreciate and not just appreciate in a straight line.
Rumour #2: There is report that MSCI has had a meeting with China SAFE & CSRC in allowing China A-shares to be included in MSCI EM index. With the recent CNY appreciation trend, the talk about pushing back RQFII approval process, the fully deregulation of QFII mechanism and the opening of capital account would still be a medium term event if not a long term occurrence. The source of the rumour can be attributed to this article http://finance.sina.com.cn/stock/yjdt/20130418/213915196798.shtml. It is funny how rumours always starts on Friday and spread like wild-fire by brokers who work their phones tirelessly starting with the calls to their top clients and working down the list. Do note that brokers are not necessarily there to ”warn” you of things but their incentive is to get you to do something and execute / trade more so that volumes are churned and they earn their commission dollars! Asianmacro think this rumour is long in the tooth and probably not today or any more likely in the near future ….
SHCOMP rallied and spike up higher on these rumours and dragged everything else along. I will not be a buyer of these rumours especially #2 …. and will use any stupid spike up in risky assets to sell them short!
P.S. Will be looking at good levels to short CNY NDF and also add to DAX and SPX and AS51 shorts on rally due to the China rumours and feel good.
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