China’s financial market reform stokes rally in yuan to four-month high
- China has announced a series of steps to open its financial markets in recent weeks, boosting investor sentiment and leading to an inflow of foreign money
- The yuan rose 0.24 per cent to 6.98 per dollar on Thursday, its strongest level since March 13
The yuan’s exchange rate strengthened above the psychologically important level of 7 per US dollar on Thursday, as optimism over new policies liberalising China’s financial markets helped attract foreign capital.
The benchmark Shanghai Stock Exchange has risen more than 9 per cent so far this week, putting it on a course for its best weekly performance in five years and helping drive the appreciation of the yuan.
Analysts said the rally in stocks, reflecting funds flowing into China, was boosted by commentary about a “healthy” bull market in the state-backed China Securities Journal over the weekend, which helped counter the bearish sentiment that followed the passage of the new national security law for Hong Kong last week.
Other positive policy developments include the simplification of a registration system for initial public offerings on the ChiNext board, the relaxation of state-owned enterprise listing in the domestic market, and the introduction of derivative products in Hong Kong for mainland-traded shares.
“The timing of announcing market reforms is quite important, since it was around the time of the passing of the national security law in Hong Kong,” said Tommy Wu, lead economist at Oxford Economics. “It is a timely reminder to foreign investors not to worry so much, and that opening up measures in China are indeed materialising.”
