The Offshore Yuan Just Surged The Most In History
A top tier global economy intervened to stabilize its currency on Tuesday and Wednesday. And I don't mean Japan. Or, actually, them too, but in this case, I mean China.
Following reports that state banks were selling dollars Tuesday to manage the yuan's fall after the weakest fix since 2008 suggested authorities in Beijing are prepared to countenance some catch up vis-à-vis spot and CNH following the conclusion of the Party congress, the offshore yuan rose the most ever on Wednesday.
The 1.8%
A Chinese fintech I own is normally a very highly profitable business. It’s a small cap that typically has bodacious earnings and grows like crazy. They also do some modest, offshore business (I believe it’s in Canada).
They were growing so much a year ago that their coffers overflowed, so they started to provide a dividend. Of course, as the world’s economies are constrained by economic and growth challenges, I’m waiting for the next quarterly report to see how much the company’s usual pattern of growth may be stunted.
Bottom line, the outlook for China’s banks doesn’t look favorable these days. China’s property and banking stocks are definitely in trouble. Today my fintech has a very deeply depressed stock price (because markets have been unkind, and who knows what will happen next in China). The only bright spot is the rate for the stock dividend is now 9.68%, which is stunning if you like dividends.
Government support for the yuan can help the currency and the economy a little. But if the ongoing growth proposition for this fintech completely dries up, I’ll accept the loss and sell. That is the way risk can go when investing in China. Fingers crossed, for now, that they will weather this storm.
I hope that China’s leaders will take a deep breath and avoid creating additional headwinds for their economy and stocks for a little while. Reckon I just have to see how the bad business environment in China may impact sales and operations for my investment. Ha! Probably not good, but I’ll let the numbers tell the story.