A recent report by bank analysts suggests that each 1% appreciation of the yuan against the U.S. dollar could boost Chinese stock markets by about 3%. This growth is attributed to factors such as improved corporate profit outlooks and increased foreign capital flow.
“Historically, Chinese stocks tend to perform well when the currency appreciates,” noted the analysts, reinforcing their recommendation to purchase Chinese assets. Sectors likely to benefit from a strong yuan include consumer discretionary, real estate, and brokerages.
The MSCI China index, which includes companies listed in Hong Kong, Shanghai, and Shenzhen, has recovered from losses incurred since the tariff offensive launched by U.S. President Donald Trump on April 2, buoyed by a three-month trade truce between Beijing and Washington.
More broadly, Chinese assets have been favored due to a diversification trend away from U.S. markets amidst prolonged uncertainty over Trump’s tariff and tax cut policies.
The People’s Bank of China (the central bank) has aimed to keep the yuan stable and support the economy through interest rate cuts. The onshore yuan has risen approximately 1.4% against the dollar in May, reaching 7.1674 on Monday, the strongest level since November.
