{"id":152873,"date":"2019-08-05T09:59:54","date_gmt":"2019-08-05T13:59:54","guid":{"rendered":"https:\/\/www.countingpips.com\/?p=152873"},"modified":"2019-08-05T07:42:06","modified_gmt":"2019-08-05T11:42:06","slug":"chinas-currency-fall-rocks-global-markets-what-should-investors-do","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2019\/08\/chinas-currency-fall-rocks-global-markets-what-should-investors-do\/","title":{"rendered":"China\u2019s currency fall rocks global markets \u2013 what should investors do?"},"content":{"rendered":"
August 5, 2019<\/div>
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By George Prior<\/strong><\/p>\n

Global financial markets have been rocked by China\u2019s currency falling below an important threshold \u2013 and investors must consider action to protect their wealth and capitalize on the opportunities.<\/p>\n

This is the message from Tom Elliott, International Investment Strategist at deVere Group, one of the world\u2019s largest independent financial advisory organizations.<\/p>\n

It comes after the Chinese renminbi fell to under 7 to the U.S. dollar on Monday \u2013 the lowest in more than a decade \u2013 igniting drops in stocks and emerging market currencies and driving a rally in government bonds.<\/p>\n

Mr Elliott notes: \u201cThe nervousness in financial markets over the falling renminbi in recent weeks has reached panic levels, as the Chinese currency passes the psychologically important barrier of RMB 7 to the dollar.<\/p>\n

\u201cJust as in July and August 2015, when China engineered a small devaluation to support growth, global stock markets have panicked.\u201d<\/p>

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He continues: \u201cThis has happened for three reasons.<\/p>\n

\u201cFirst, because a weaker renminbi will export deflationary pressure around the world\u2019s manufacturing industries. Chinese goods, always competitive on price, will be even more competitive. This is therefore bad news for manufacturers outside of China, at a time when global manufacturing is struggling with weakening demand growth and the negative impact of the U.S-China trade dispute on their supply lines and profits.<\/p>\n

\u201cSecond, with Chinese imports becoming cheaper, the major central banks\u2019 efforts to energize inflation have taken a setback. And with it their attempts to \u2018normalize\u2019 interest rates, unwind quantitative easing and escape the black hole of negative real interest rates. Indeed, the size of the Chinese export sector means the direction of the renminbi is a key calculation when economists attempt to forecast global prices.<\/p>\n

\u201cThird, unlike the summer of 2015, the devaluation occurs against the background of a trade war with the U.S.\u201d<\/p>\n

For investors, the major question now is \u2018How will the U.S. respond?\u2019<\/p>\n

\u201cPolicymakers in Washington will be wondering if Beijing\u2019s refusal to intervene more heavily in the currency markets to support the renminbi is a strategic decision to put pressure on the U.S. in regard to the trade talks. Is it an \u2018aggressive\u2019 devaluation? If they conclude it is, we can expect furious reaction from Trump,\u201d says Mr Elliott.<\/p>\n

\u201cOr is it that Beijing sees a weaker currency as inevitable, given China’s slowing growth? After all, currencies do go up and down, why should China be different just because we have become used to it being managed in the past through currency intervention.<\/p>\n

\u201cIt would be ironic for the U.S. to be demanding a more liberal attitude towards trade from China, but to object to China’s currency being allowed to find a new rate in line with market conditions.<\/p>\n

\u201cIf Washington takes this line, investors can sleep a little easier.\u201d<\/p>\n

The International Investment Strategist concludes: \u201cIt is worth perhaps remembering the investor\u2019s mantra: where there is chaos, there is opportunity.<\/p>\n

\u201cInvestors are urged to check their portfolios to ensure that they are best-positioned to capitalize on current opportunities and sidestep the risks.\u201d<\/p>\n

About:<\/strong><\/em><\/p>\n

deVere Group is one of the world\u2019s largest independent advisors of specialist global financial solutions to international, local mass affluent, and high-net-worth clients.\u00a0 It has a network of more than 70 offices across the world, over 80,000 clients and $12bn under advisement.<\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

By George Prior Global financial markets have been rocked by China\u2019s currency falling below an important threshold \u2013 and investors must consider action to protect their wealth and capitalize on the opportunities. This is the message from Tom Elliott, International Investment Strategist at deVere Group, one of the world\u2019s largest independent financial advisory organizations. It […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-152873","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/152873","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=152873"}],"version-history":[{"count":1,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/152873\/revisions"}],"predecessor-version":[{"id":152874,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/152873\/revisions\/152874"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=152873"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=152873"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=152873"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}