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With hedge fund manager, CNBC regular and long-time veteran of the Russian markets Tim Seymour at the helm, Emerging Money (http://www.emergingmoney.com) provides education, trading analysis and comprehensive views of emerging markets around the world. As economies in the BRIC group and beyond... More
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  • The China engine keeps on rolling, Yuan implications 0 comments
    Oct 26, 2010 3:08 PM | about stocks: CYB, FXI, HAO, YAO

    The trade numbers from China demonstrate that the global economy seems to have bottomed out somewhere around mid-summer, and that bodes well for emerging stocks.

    With Chinese exports surging a spectacular -- but largely expected -- 25% in September, it is evident that the factories of Asia are churning out everything the world buys, and that (equally importantly) the world still has plenty of money to buy it.

    Check out export-oriented ETFs like FXI and even broader-based funds like HAO and YAO:

    Yuan implications

    The news will probably not encourage Congress to ease up on its efforts to get Beijing to revalue the yuan. After all, the longer the Chinese currency remains artificially weak compared to the dollar and other monetary units, the more competitive Chinese exporters will be on a global basis.

    Although China is also consuming a lot more in the form of raw materials and manufactured products, the increase in exports still pushed the country's trade surplus up $16.9 billion. Between the surplus, which is on track to hit $180 billion by the end of the year, and the surge of global capital into Chinese markets, Beijing's currency reserves have now reached a massive $2.65 trillion.

    Much smaller increases in foreign flows have sent alarm through governments from Brasilia to Bangkok as those nations struggle to weaken their currencies and protect their local industries. However, the simple fact that China's currency is already artificially weak and so -- as yet -- Beijing has yet to join the currency wars. Significantly, CYB and similar funds are flat today.



    Disclosure: no position
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