Certain major sectors and regional markets are likely to reap gains from an expected boost in the yuan, after Beijing suggested that it would allow more flexibility for the valuation of the Chinese currency.
Analysts pointed to a clear precedent between 2005 and 2008 when the currency rose 19 percent against the US dollar as China had a managed yuan float.
They have been fast to fire off write-ups on the advantages that will be harvested by various business sectors including property, gaming and tourism, as the rise in the yuan’s value boosts the purchasing power of the mainland.
However, some have also highlighted the squeeze in profit margins, which Chinese shipbuilders and contract manufacturers may suffer.
In a report by Mr. Chua Hak Bin, head of research for Citigroup in Singapore, the company noted that a growing yuan could prompt a rally in other Asian currencies, drawing a huge capital flow into Asia, as investors expect currency gains ahead.
This may result in Asian equities outperforming other markets, as investors park funds in regional markets.