Chinese stocks and exporters have benefited from a relatively undervalued Chinese yuan. Bruce Lavine, president and chief operating officer of WisdomTree, explained how the relationship between the yuan and the U.S. dollar are affecting how people buy Chinese stocks.
“It’s a very different bet when you’re buying the equities versus the currency,” Lavine told CNBC.
Chinese stocks are roughly up 60 percent year to date, but have been extremely volatile investments, Lavine said. He added that if the yuan appreciates in the future, it could hurt Chinese exporters’ profits and their equity prices.
“It appears to be a trade headed in one direction,” he said.
“It’s much like how the Fed is on pause until they start tightening and the central bank of China is taking their time as well, but when they do, there’s consensus about which direction it’s headed. So if you’re sitting on some cash and if you want to have some upside potential for that cash without a lot of downside, it’s an interesting trade.”
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More Market Intelligence:
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- Why 'Big Is Beautiful' in Emerging Markets
- Yuan vs Dollar: Who Said What in 2009
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Disclosures:
No immediate information was available for Lavine or his firm.
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