Chinese market volatility and US CPI to dominate FX

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Chinese equities are seeing high volatility, as markets swing between anticipation and disappointment over China’s fiscal support, DBS’s FX analyst Philip Wee notes.

RMB swayed amid equity swings “The CSI300 fell by 7% yesterday, after a meeting by the National Development and Reform Commission offered no details on fiscal spending. Nevertheless, the boost to sentiment from the slew of September policy announcements should not be discounted, and Chinese stocks are still over 20% higher despite yesterday’s losses.” “Finance Minister Lan will hold a briefing on fiscal policythis Saturday, and Chinese market volatility could continue for now.

USD/CNH had bounced to 7.09 amid equity volatility,which is unsurprising given over USD9bn of inflows to US-listed Chinese equity ETFs on hopes of the efficacy of Chinese stimulus.” “We expectRMB gains on policy stimulus to be gradual given a still fragile economic outlook, and high uncertainty with regards to external trade and tariffs. Last Friday, the EU has voted to formally enact tariffs on Chinese EV imports, and China had also announced anti-dumping measures on EU brandy in response.

 

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