CNH: Several factors for a neutral, or even a positive outlook – SocGen

Analysts at Societe Generale suggest that there are several factors argue for a neutral, or even a positive outlook on the RMB over the coming 3-6 months relative to the forwards and on a relative value basis against regional low yielders (e.g. against TWD).

Key Quotes

“These factors include: a weaker dollar trend, the authorities apparently content with a stable (instead of depreciating) CFETS basket, the upcoming leadership changes, better growth data, and earlier tightening in capital controls bearing fruit. The major near term risk for the RMB remaining strong is a retracement in the EUR / reversal in the weak dollar trend, Starting in Q4 Chinese growth is expected to weaken (SG expects 6.4% YoY GDP growth in Q4 2017 and 6.3% in Q1 2018), which may cause current positive sentiment to be re-rated and to cushion the downturn the authorities may embrace modest depreciation over a longer time horizon.”