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Strategies & Market Trends : Asia Forum -- Ignore unavailable to you. Want to Upgrade?

To: Bosco who wrote (8829)	7/13/1999 9:26:00 AM
From: Paul Berliner	Read Replies (1) \| Respond to of 9980

>China may devalue yuan within 6 months, says Duff and Phelps Credit By Ranjiv Raman, Bridge News Hong Kong--July 13--Global rating agency Duff and Phelps Credit said Tuesday that China is likely to devalue the yuan currency sometime over the next six months, based mainly on a deterioration in its balance of payments picture. Roger Scher, Head of Asian Sovereign Rating for DCR, cited concerns over China's economic growth and its price structuring system, which show deflationary tendencies. Scher further noted, in an interview with Bridge News, that a weaker Japanese yen has added to pressure on Beijing to devalue, as well as concerns over stalling economic growth and a nearly two-year deflationary rut. The effect of any yuan devaluation--while expected to put heavy pressure on the Hong Kong dollar's pegged exchange rate to the U.S. dollar--wouldn't necessarily lead to a break in the U.S./Hong Kong dollar link, said Scher. Purchasers of the U.S. currency were paying 8.2652 yuan for one U.S. dollar on Tuesday. In Asian trade Tuesday, the dollar was changing hands with 122.10 Japanese yen. Scher said the reason Hong Kong's peg to the dollar would not necessarily lead to a break with the dollar was because Hong Kong monetary authorities are seen as well-equipped to address the situation. China's official media Tuesday highlighted central bank governor Dai Xianglong's remarks the previous day that the yuan has firm support. That reaffirmation came amid a new wave of concerns that Beijing is backing away from its pledges that the unit will not devalue. The China Securities News daily newspaper reported Dai's comments Tuesday that there is still a firm foundation for the country's stable yuan policy despite a sharp annual 62 percent drop in the country's January-to-May trade surplus. Dai stressed that China still had a U.S. $7-billion trade surplus in the first five months of the year and despite a sharp drop in foreign direct investment over the long term, foreign exchange inflows will resume their upward trend. China has also increased value-added-tax (VAT) rebates--and will continue to do so--in a bid to boost exports, Dai said, adding that lower prices as a result of continuing deflation in China will help exports pick up further in the second half of the year. In addition, the official Xinhua News Agency quoted the PBOC Governor as saying the stability of the yuan "will be guaranteed by the economic situation in China because the exchange rate is based on supply and demand in the marketplace." "All these factors will combine to make a solid foundation for the stability of the China yuan exchange rate," the Securities News quoted Dai as saying. Scher noted that the DCR agency believes that a devaluation of the yuan may not hamper the creditworthiness of either Hong Kong or China, depending on how authorities in Beijing and Hong Kong managed a possible shift in the y uan value. Investors took comments from People's Bank of China Governor Dai Xianglong Monday to indicate that China is slightly changing its usual strong stance on the currency. End By Bridge News Please see news.bridge.com for a complete list of Bridge media rewrites.