RMB Into SDR Or Aggravating Domestic Stock Market Liquidity

RMB is included in the SDR. Under the current market environment, Wang Tao believes that the impact of the RMB's assessment and inclusion in China's stock market in November will be negative in the next 3-6 months, but in the long term it will be biased. "SDR"

Index provider MSCI now expects Chinese stocks (including A shares, H shares, ADR shares, red chips and private shares) to occupy 37.5% of the MSCI index and 4.8% of the MSCI global index in its "ultimate goal" scenario.

This will be better than Chinese stock.

Wang Tao also said that the possibility of a significant depreciation of the RMB in the short term is unlikely, but investors may not rule out its possibility, which could trigger a round of risk of "panic swap" between Chinese enterprises and residents.

Given the current valuation, China's ADR is particularly attractive if foreign investors are willing to hold Chinese assets.

Once MSCI incorporated ADR into its index in March 2016, ADR will account for 16-17% of the MSCI China Index.

On this basis, most investors are currently poorly matched with China.

But in view of the expected growth rate of ADR 2016 over 30%, investors will not be able to ignore such an important sector.

In the long run,

It is considered that the RMB will be included in the SDR, which will aggravate the outflow and inflow of the domestic stock market with the slight depreciation of the RMB.

On the one hand, Chinese investors will continue to realize the necessity of pforming domestic savings into overseas assets to diversify investment, leading to the diversion of liquidity in China's stock market.

On the other hand,

The valuation assets are expected to become an integral part of the global portfolio. The capital entering China's domestic capital market will also increase steadily, especially in the last stage of China's capital account opening, when the restriction on capital inflow is gradually relaxed.