The renminbi plummeted, and foreign investors sold US bonds and bought Chinese bonds
The reason for the sudden ** of the yuan.
The RMB's sharp ** surprise this week has seen the market skeptical of the RMB's trajectory after three consecutive weeks**. The main reasons for this ** can be attributed to the manipulation of foreign capital and the problems of the US bond market.
Over the past few months, foreign investors have continued to buy large amounts of Chinese bonds, which undoubtedly reflects their confidence in China's investment environment. According to the latest data, the scale of continuous purchases of Chinese bonds by foreign institutions has approached 100 billion yuan, of which 40 billion yuan was purchased in October, and the purchase amount is expected to reach 250 billion yuan in November. This shows that foreign investors have a strong demand for Chinese bonds and choose relatively safe varieties, which is the opposite of the market's weak investment in the US bond market.
Reasons for foreigners to sell U.S. bonds.
There are two main reasons for foreign investors to sell US bonds: on the one hand, the US bond market is facing many problems, and on the other hand, Chinese bonds are attractive to foreign investors.
The U.S. debt market is currently facing a number of challenges, with a growing size, a higher total annual interest payout, and significant difficulties in the issuance of new U.S. bonds. These issues have not stopped the sell-off in some countries, and while US Treasuries have not continued recently, the likelihood of a foreign takeover of the market has become increasingly small.
On the other hand, Chinese bonds are safer than US bonds, and foreign investors choose to seek relatively high investment returns, while valuing credit and safety, so the investment demand in China's bond market remains strong. In recent years, the total amount of Chinese bonds held by foreign institutions has increased significantly, reaching 33 trillion yuan, and the number of foreign investors increasing their holdings of Chinese bonds is also increasing.
Options for foreign capital flows.
The choice of foreign capital flows is mainly influenced by the bond market. Recent data shows that overseas institutions have been net ** Chinese bonds for nearly 9 consecutive months, with an amount of nearly 100 billion yuan, compared with the small outflow of funds from northbound, which is not enough to represent the overall attitude of overseas institutions.
Offshore capital outflows exceeded $60 billion in September and October, compared to a total of just $1.8 billion in November. In the context of a larger bond market, net purchases of Chinese bonds by foreign investors far exceeded net outflows of foreign funds. Therefore, we have reason to believe that Chinese bonds will remain one of the main options for foreign investors in the coming period.
It is worth mentioning that in the context of the sharp appreciation of the renminbi, the demand for Chinese bonds by foreign investors has increased unabated. It is also a reminder that foreign investors' confidence in China's economy and bond markets remains strong, and that investment in the Chinese market will continue to grow.
Summary. The entry of foreign capital into the Chinese market shows the market's confidence and recognition of China. Although the RMB exchange rate has seen a relatively large **, this should not be exaggerated, because this is only a normal adjustment in the upward phase of the market. It is worth noting that the phenomenon of foreign investors continuing to ** Chinese bonds shows that the market is optimistic about China's bond market. In the future, with the continuous development of China's economy and the deepening of reform, foreign investment in the Chinese market will continue to grow. In the context of the rapid development of China's bond market, we need to maintain sensitivity to market changes and integrate into the global capital market structure in order to grasp more opportunities and development.