Saturday, June 5, 2010

How to invest in Chinese Yuan?

There are not some many safe heavens for investing with current fears about European debts, still sluggish US labour market, political tensions in Korean peninsula and between Turkey and Israel. Is the right time for placing your money in Chinese yuan? How to invest in Chinese currency?

We can see declining different assets classes across the board. Only safe peers are gold and US dollar. But what about Chinese yuan? Even with government actions against overheating growth Chinese economy is one of the fastest growing. Based on latest estimates Yuan is undervalued by 20-40%.

US suffers a huge trade deficit, which is formed predominantly by artificially weak yuan, is pegged to the dollar since July 2008. At that time, China pegged it to support its export policy. There is growing pressure also directly from China itself. It is only a matter of time to strengthen Chinese currency against US dollar.

Here are few tips for investors willing to invest money to Chinese currency.

Currency ETFs

Market Vectors Chinese Renminbi/USD ETN (CNY). This is actually exchange traded notes which provides exposure to exchange rates of foreign currencies.

WisdomTree Dreyfus Chinese yuan (CYB). This ETF follows money market rates in China and changes in value against US dollar.

Country ETFs

Another way how to benefit from strengthening yuan is investing in Chinese or Hong Kong stocks. These stocks (especially consumer goods stocks) should be increasing in parallel with stronger Chinese currency. Here are major regional ETFs.

iShares MSCI Hong Kong Index (EWH)
iShares FTSE/Xinhua China 25 Index (FXI)


0 Responses to "How to invest in Chinese Yuan?"