Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
Currency War of 2009–11 wikipedia , lookup
International monetary systems wikipedia , lookup
Foreign exchange market wikipedia , lookup
Fixed exchange-rate system wikipedia , lookup
Purchasing power parity wikipedia , lookup
Internationalization of the renminbi wikipedia , lookup
Foreign-exchange reserves wikipedia , lookup
See the Disclosure Appendix for the Analyst Certification and Other Disclosures Renminbi Outlook and Implications for Trade Yiping Huang Head of Asia Pacific Economic and Market Analysis Phone: +852-25012735; Email: [email protected] 20 January 2006 Global Forecasts for Key Assets U.S.: Federal Funds Treasuries (Period Average) Euro Area: US$/€ Euro Repo Rate 10-Yr Bunds (Period Average) Japan: ¥/US$ Yen Call Money 10-Yr JGB (Period Average) 11-Jan-07 5.25% 4.68 1.30 3.50% 4.02 120 0.27% 1.75 1Q 07E 5.25% 4.60 1.27 3.50% 3.75 118 0.50% 1.90 2Q 07E 5.00% 4.65 1.26 3.50% 3.80 115 0.75% 2.00 3Q 07E 5.00% 4.85 1.25 3.50% 3.85 110 0.75% 2.10 4Q 07E 5.00% 4.90 1.24 3.75% 4.00 108 1.00% 2.10 Sources: National sources and Citigroup estimates 2 Asia Foreign Reserves and Reserve Diversification Shares of US Dollar in Central Banks’ Total Foreign Exchange Reserves (%) Foreign Exchange Reserves as Shares of GDP for Asian Economics, 2006 (%) 120 % 80 98.8 100 80 75 73.2 69.7 60 % of Total Allocated Reserves 70 54.1 65 40 36.7 30.3 26.0 18.6 20 60 18.5 11.3 55 1Q99 1Q00 1Q01 1Q02 1Q03 1Q04 1Q05 1Q06 0 CN HK IN ID KR MY PH SG TW TH Note: We use reserve data at the end of October 2006 and 2006 GDP estimates Source: CEIC Data Company Limited, Citigroup Estimates Industrial Developing Source: IMF, Composition of Foreign Exchange Reserves 3 Asia Real Effective Exchange Rates Deviation from LT Average Real TradeWeighted FX Rate in 2006(%) Changes in Real Effective Exchange Rates: USD, EUR, RMB and Emerging Asian Currencies 20 12 % 10.0 15 13.1 9 10 6 4.8 4.7 5 0.7 0 -0.7 -5 3.0 3 0.2 -1.0 -3.6 2.0 1.1 0 -5.0 -1.4 -2.0-1.9 -3 -10 1.9 1.5 -15 -3.1 -4.0 -4.1 -12.8 -1.8 -2.8 -10.2 -11.8 -1.1-1.4 -4.8 -6 -17.8 -20 -9 -9.9 -25 -24.6 -27.2 -30 -12 2003 KR IN EU HK US SG PH TW JP TH 2004 2005 2006 2007F ID MY CH USD Note: For implied real exchange rate appreciation, a higher index shows appreciation Source: Citigroup estimates. EUR RMB Asia Currencies Source: Citigroup estimates. 4 Asia Asian Currencies Are Likely to Become More Flexible Range in December Versus US$ Euro EUR Japan YEN China RMB Hong Kong HK$ India INR Indonesia IDR Malaysia MYR Philippines PHP Singapore SGD South Korea KRW Taiwan TWD Thailand THB Vietnam VND Source: Citigroup estimates. 1.3067-1.3336 114.92-119.16 7.8089-7.8331 7.7685-7.7797 44.17-45.03 8996-9170 3.531-3.597 49.05-51.5 1.5339-1.5482 915.5-931.2 32.29-32.74 35.195-36.525 16043-16081 3 Months Forecast Forward 1.2600 118.00 7.6600 7.7700 44.45 9050 3.5100 49.850 1.5250 935.0 32.700 36.000 16030 1.3002 119.11 7.6870 7.7813 44.39 9170 3.4865 48.680 1.5296 935.1 32.446 36.028 16180 6 Months Forecast Forward 1.2600 115.00 7.5000 7.7600 43.75 9200 3.4800 49.000 1.5100 920.0 31.800 35.700 16020 1.3046 117.72 7.5995 7.7582 44.69 9247 3.4715 48.700 1.5224 933.4 32.156 35.980 16329 12 Months Forecast Forward 1.2400 108.00 7.3500 7.7570 43.00 9300 3.4500 48.000 1.4800 900.0 31.200 35.500 16000 2008 Forecast 1.3117 115.13 7.4265 7.7203 45.10 9397 3.4440 48.810 1.5084 930.3 31.599 35.875 16593 1.23 104 7.11 7.76 42 9366 3.46 48.38 1.44 900 31 35 16350 5 Asia Asia Leading 2nd Leg Dollar Weakness China Hong Kong India Indonesia Korea Malaysia Philippines Singapore Taiwan Thailand CNY/USD Real Effective Exchange Rate (2005=1) HKD/USD Real Effective Exchange Rate (2005=1) INR/USD Real Effective Exchange Rate (2005=1) IDR/USD Real Effective Exchange Rate (2005=1) KRW/USD Real Effective Exchange Rate (2005=1) MYR/USD Real Effective Exchange Rate (2005=1) PHP/USD Real Effective Exchange Rate (2005=1) SGD/USD Real Effective Exchange Rate (2005=1) TWD/USD Real Effective Exchange Rate (2005=1) THB/USD Real Effective Exchange Rate (2005=1) 2005 8.19 1.00 7.78 1.00 44.30 1.00 9,711 1.00 1,024 1.00 3.79 1.00 55.1 1.00 1.66 1.00 32.2 1.00 40.2 1.00 2006E 7.92 1.03 7.77 0.98 45.35 0.99 9,155 1.16 955 1.07 3.68 1.03 51.3 1.13 1.59 1.01 32.5 0.99 38.0 1.08 Note: For implied real exchange rate appreciation, a higher index shows appreciation Source: Citigroup estimates. 2007E 7.55 1.05 7.76 0.94 43.20 1.04 9,203 1.23 920 1.07 3.57 1.04 49.2 1.19 1.51 1.02 31.7 0.97 36.0 1.13 2008E 7.11 1.11 7.76 0.91 42.00 1.08 9,366 1.22 900 1.07 3.46 1.06 48.4 1.21 1.44 1.03 30.6 0.97 35.0 1.13 2009E 6.75 1.18 7.76 0.88 41.50 1.09 9,467 1.23 890 1.06 3.35 1.07 47.4 1.23 1.37 1.05 30.0 0.96 33.5 1.15 2010E 6.48 1.22 7.75 0.87 41.00 1.11 9,350 1.28 880 1.05 3.25 1.08 46.4 1.24 1.32 1.06 29.4 0.96 31.5 1.19 2011E 6.22 1.27 7.75 0.88 40.50 1.14 9,450 1.31 860 1.06 3.15 1.11 45.5 1.26 1.28 1.07 28.5 0.97 30.5 1.22 6 China Overdependence of Growth on Investment and Exports Shares of gross fixed capital formation in GDP: China, Malaysia, Thailand & Singapore, 1952-2005 (%) 50 % Rising dependence on external markets 8 GDP % USD bn 250 7 40 200 6 5 30 150 4 20 100 3 2 10 50 1 0 1955 1960 1965 1970 1975 1980 China Singapore 1985 1990 1995 2000 Thailand Malaysia 0 2005 0 1998 1999 2000 2001 2002 2003 Current Account (% GDP, Left Axis) Source: China National Statistics Bureau, CEIC Data Company Limited and Citigroup estimates. 2004 2005 2006F 2007F 2008F Trade Balance (USD bn, Right Axis) 7 China Balanced Trade Remains a Distant Goal Trade Balance and Export/Import Growth Percent 60 Change in the ratio of Exports from Individual Countries to Global GDP (five-year intervals, percent of global GDP) US$, bil. 25 45 Percent 1.0 Percent 1.0 China Germany Japan Korea 20 0.8 0.8 15 0.6 0.6 0.4 0.4 0.2 0.2 0.0 0.0 30 10 15 5 0 -15 2000 0 -5 2001 2002 Trade balance (Right Axis) 2003 2004 Exports (Left Axis) 2005 2006 Imports (Left Axis) Source: Citigroup estimates using data from CEIC Data Company. -0.2 -0.2 1950-55 1955-60 1960-65 1965-70 1970-75 1975-80 1980-85 1985-90 1990-95 1995-00 2000-05 Source: Citigroup estimates using data from CEIC Data Company. 8 Model Simulation of 3% Renminbi Appreciation Citigroup basecase scenario GDP Growth (% yoy) Total Consumption (% yoy) Fixed Capital Investment (% yoy) Exports (% yoy) Imports (% yoy) Trade Balance (US$ bn) Current Account Balance (% GDP) Foreign Exchange Reserves (US$ bn) Fiscal Balance (% GDP) Industrial Production (% yoy) CPI (% yoy) 7.60 8.30 8.30 12.80 13.00 34.0 1.80 330.0 -2.80 11.60 0.50 Scenario assuming 3% Yuan appreciation 7.24 8.26 8.06 12.16 13.2 31.4 1.6 326.5 -2.92 11.3 0.4 Difference -0.36 -0.04 -0.24 -0.64 0.2 -2.6 -0.2 -3.5 -0.12 -0.3 -0.1 Source: Citigroup estimation using the Oxford Macroeconomic Model. 9 Currency Appreciation Accelerated Since September Market expectation in the beginning of the year and actual appreciation in 2006 % 4.5 4.18 4.0 Jan-99 7.7 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 30,000 25,000 7.8 3.5 3.24 20,000 7.9 3.0 15,000 2.46 2.5 8 10,000 2.0 8.1 5,000 1.38 1.5 8.2 0.92 1.0 0.5 Appreciation is mainly driven by surging trade surplus 0.55 0 0.66 8.3 -5,000 8.4 -10,000 0.12 0.0 1 mo 3 mo 6 mo Spot Forward 12 mo CNY/USD Trade Surplus US$ mn Source: CEIC Data Company Limited. 10 Currency Appreciation Has Limited Impact on Exports US$ mn Exports to the US took off After China’s gained access to WTO No evidence of profit squeeze yet % YTD 7.6 60 20,000 18,000 7.7 16,000 7.8 14,000 7.9 12,000 10,000 8 8,000 8.1 6,000 40 30 20 8.2 4,000 8.3 2,000 0 Jan-99 50 8.4 Jan-00 Jan-01 Jan-02 Exports to the US Jan-03 Jan-04 Jan-05 Imports from the US CNY/USD Jan-06 10 0 Feb-06 Mar-06 Apr-06 May-06 Jun-06 Jul-06 Aug-06 Sep-06 Oct-06 Nov-06 State-Owned Enterprises Private Enterprises Overall Industrial Profits Source: CEIC Data Company Limited. 11 Trade Surplus Boosted Excess Liquidity Problem The correlation between monthly money growth and trade surplus was as high as 0.289 Rmb bn Greater China Exchange Rate Forecasts 2005 Rmb bn 900 250 800 200 700 2006F 2007F 2008F 2009F 2010F 2011F 6 28 6.5 29 7 30 7.5 31 8 32 8.5 33 150 600 500 100 400 50 300 200 0 100 -50 0 -100 Jan-04 Jul-04 Jan-05 Jul-05 M2 (left axis) Jan-06 Trade Surplus Jul-06 -100 CNY/USD HKD/USD NTD/USD (right axis) Source: CEIC Data Company Limited, and Citigroup estimates. 12 Nominal CNY/USD vs. REER (CTERI) Jan-99 0.9 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 1.1 0.95 1.05 1 1 1.05 0.95 1.1 0.9 Nominal CNY/USD REER Source: CEIC Data Company Limited, and Citigroup estimates. 13 China Beginning of Faster Yuan Appreciation? Expectation of appreciation in 12 months by the nondeliverable forward market 8 % Accumulation of FX Reserves and Increases in Trade Surplus and FDI 35 USD bn 30 6 25 4 20 2 15 0 10 -2 5 -4 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 0 Jan-05 Apr-05 Jul-05 Oct-05 Jan-06 Net Increase in FX Reserves Source: Reuters, Citigroup Apr-06 Jul-06 Oct-06 Trade Surplus Plus FDI Source: CEIC Data Company Limited and Citigroup estimates 14 Disclosure Appendix ANALYST CERTIFICATION I, Yiping Huang, economist and the author of this report, hereby certify that all of the views expressed in this research report accurately reflect my personal views about any and all of the subject issuer(s) or securities. I also certify that no part of my compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or views in this report. Other Disclosures ADDITIONAL INFORMATION AVAILABLE UPON REQUEST Citigroup Global Markets Inc, including its parent, subsidiaries and/or affiliates (“CGMI”), may make a market in the securities discussed in this report and may sell to or buy from customers, as principal, securities recommended in this report. CGMI may have a position in securities or options of any issuer recommended in this report. An employee of CGMI may be a director of an issuer recommended in this report. CGMI may perform or solicit investment banking or other services from any issuer recommended in this report. Within the past three years, CGMI may have acted as manager or co-manager of a public offering of the securities of any issuer recommended in this report. Securities recommended, offered, or sold by CGMI : (i) are not insured by the Federal Deposit Insurance Corporation; (ii) are not deposits or other obligations of any insured depository institution (including Citibank); and (iii) are subject to investment risks, including the possible loss of the principal amount invested. Investing in non-U.S. securities entails, including ADR’s, certain risks. The securities of non-U.S. issuers may not be registered with, nor be subject to the reporting requirements of, the U.S. Securities and Exchange Commission. There may be limited information available on foreign securities. Foreign companies are generally not subject to uniform audit and reporting standards, practices and requirements comparable to those in the U.S. Securities of some foreign companies may be less liquid and their prices more volatile than securities of comparable U.S. companies. In addition, exchange rate movements may have an adverse effect on the value of an investment in a foreign stock and its corresponding dividend payment for U.S. investors. Net dividends to ADR investors are estimated, using withholding tax rates conventions, deemed accurate, but investors are urged to consult their tax advisor for exact dividend computations. Although information has been obtained from and is based upon sources CGMI believes to be reliable, we do not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute CGMI 's judgement as of the date of the report and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation for the purchase or sale of a security. Investing in non-US securities by US persons may entail certain risks. Investors who have received this report from CGMI may be prohibited in certain US States from purchasing securities mentioned in this report from CGMI ; please ask your Financial Consultant for additional details. This report is distributed in the United Kingdom by Citigroup Global Markets Limited , Citigroup Centre, Canada Square, Canary Wharf, London E14 5LB, UK. This material is directed exclusively at market professional and institutional investor customers and is not for distribution to private customers, as defined by the rules of the Financial Services Authority, who should not rely on this material. Moreover, any investment or service to which the material may relate will not be made available to such private customers. This material may relate to investments or services of a person outside of the United Kingdom or to other matters which are not regulated by the Financial Services Authority and further details as to where this may be the case are available upon request in respect of this material. If this publication is being made available in certain provinces of Canada by Citigroup Global Markets (Canada) Inc. ("CGMI Canada"), CGMI Canada has approved this publication. If this report was prepared by CGMI (excluding Nikko Citigroup Limited) and distributed in Japan by Nikko Citigroup Limited, it is being so distributed under license. This report is made available in Australia, to non retail clients through Citigroup Global Markets Australia Pty Limited (ABN 64 003 114 832), and to retail clients through Smith Barney Citigroup Australia Pty Ltd (ABN 10 009 145 555), Licensed Securities Dealers In New Zealand it is made available through Citigroup Global Markets New Zealand Limited, a member firm of the New Zealand Stock Exchange. This report does not take into account the investment objectives, financial situation or particular needs of any particular person. Investors should obtain advice based on their own individual circumstances before making an investment decision. Citigroup Global Markets (Pty) Limited is incorporated in the Republic of South Africa (company registration number 2000/025866/07) and its registered office is at Citibank Plaza, 145 West Street , Sandown, Sandton, 2196, Republic of South Africa. The investments and services contained herein are not available to private customers in South Africa. This publication is made available in Singapore through Citigroup Global Markets Singapore Pte. Ltd., a Capital Markets Services Licence holder. This report is being distributed in Hong Kong by or on behalf of, and is attributable to Citigroup Global Markets Asia Limited, 50th Floor, Citibank Plaza, 3 Garden Road, Central, Hong Kong. Citigroup Global Markets Inc. is a member of the Securities Investor Protection Corporation (SIPC). © Citigroup Global Markets Inc., 2007. All rights reserved Smith Barney is a division and service mark of Citigroup Global Markets Inc. and its affiliates and is used and registered throughout the world. Citigroup and the Umbrella Device are trademarks and service marks of Citicorp and its affiliates and are used and registered throughout the world. CitiFx is a service mark of Citicorp . Any unauthorized use, duplication or disclosure is prohibited by law and may result in prosecution. Nikko is a service mark of Nikko Cordial Corporation. 15