The Entire Chinese Market Has Become A Big Bet On Yuan Repricing

The market intends to force Chinese leaders to act on yuan repricing. If they don’t, investors will push the Shanghai market high into bubble territory, setting up for a dangerous collapse.


SHANGHAI (AP) — Chinese shares extended gains Wednesday for a fourth session, led by banks, on hopes the government will let the yuan resume appreciating against the dollar.

The benchmark Shanghai Composite Index added 20.34 points, or 0.6 per cent, to close at 3,303.23. The Shenzhen Composite Index for China’s smaller second exchange edged up 0.3 per cent to 1,188.47.

Investors were betting on more foreign capital entering China’s financial markets to take advantage of a stronger yuan, analysts said. The central bank indicated last week it was ready to allow the yuan to resume its rise after the government held the currency steady against the dollar since late 2008.

“Institutional investors allocated more resources on heavyweights, because they wagered on foreign liquidity to surge,” said Xu Zhiyuan, an analyst for Capital Edge Investment & Management in Shanghai.

But Xu said hopes for a stronger yuan in the near future still might be dashed. President Barack Obama didn’t push the Chinese hard on currency during his visit to China this week.

Industrial & Commercial Bank of China Ltd., China’s biggest commercial lender, rose 1.1 per cent to 5.56 yuan. Bank of China Ltd. leapt 1.9 per cent to 4.38 yuan.

Oil stocks rose after crude climbed to near $80 a barrel in Asia.

PetroChina Ltd., Asia’s biggest oil and gas producer, gained 1.2 per cent to 14.01 yuan, while China Petroleum & Chemical Corp., Asia’s largest refiner by capacity, jumped 3.3 per cent to 12.72 yuan.

Coal producers rose on higher demand after snow storms battered Northern China. China Shenhua Energy Co., the country’s biggest coal producer, added 1.5 per cent to 37.99 yuan. Zhengzhou Coal Industry & Electric Power Co. advanced 4.9 per cent to 14.02 yuan.

In currency markets, the yuan weakened to 6.8269 to the U.S. dollar, down from Tuesday’s close of 6.8267.

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