Renminbi holds some promise for idea-starved hedge funds
To disabuse you of belief in rational economic man, just look at the towers in Las Vegas and Macao that demonstrate that people are willing
to throw good money after bad indefinitely.
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If you need yet more proof, look
at the losses incurred over the years
by the people who have used the non-deliverable forward (NDF)
market to go long the Chinese renminbi.
Unlike the Vegas or Macao suckers, they had the weight of academic and policy wonk opinion behind their no-brainer bet.
China, it was alleged month after month, year after year, could no longer sop up the dollars needed
to keep the renminbi from sharply appreciating against the dollar.
But it did.
The NDF market would seem to some to be a slightly obscure arena.
It exists because the Chinese authorities have discouraged active trading in their currency.
"Non-deliverable" means that, at the end of the NDF contract term, the renminbi buyer gets only the dollar equivalent of the renminbi's value,
as imposed by a reference price determined "onshore" in China.
It is big, though. According to the Bank for International Settlements, the dealers in renminbi NDFs trade about $700m a day, with two-way, liquid markets offered in $10m size
for a spread of three to five basis points. That is a real market and it is accessed by traders, professional investors, exporters and importers through their banks.
The speculators among them read frequent headlines about US politicians, smokestack industrialists and union officers who want
China to revalue its currency
by 20 per cent, 30 per cent or more . . . or else. They believe this.
The banks, which are content
to run the casino rather than gambling with their own money,
are willing to sell them the renminbi forward. Somehow, though, the revaluation rate priced into the renminbi forwards was always greater than the result at the end of the contract; the renminbi bulls always had to fork over the difference when their contracts came due.
The dynamics of the renminbi have changed now, though, and it is time to go buy the NDF forwards. I believe they are going to start going into the money.
This has nothing to do with threats by senators or Treasury secretaries. It also does not have much to do with the Chinese listening to gold bugs or dollar bears who think the country's dollar reserve accumulation is not good portfolio management. It has everything to do with Chinese domestic policy considerations.
How much money is to be made here? Active traders in the renminbi have a range of targets for the rate of appreciation but the better informed seem to believe that it will be in excess of what is discounted by the forward price.
Qing Wang, a currency strategist with Bank of America in Hong Kong, says: "If you look at the forward price for year end of 2007, the market has priced in a rate of Rmb7.85 to the dollar. Our estimate is that the rate will be 7.65 to the dollar."
Why the change in the outlook? As Mr Qing sees it: "The excess liquidity that is a consequence of the [Chinese government's] currency policy is the link. If you try to maintain a stable exchange rate [against the dollar], you contribute to excess liquidity."
Among the key reasons for the Chinese government's past reluctance to allow a faster appreciation of the renminbi was the effect it would have on the standard of living for those in the countryside.
Prices for farm goods are close to world market prices; the 20-30 per cent revaluation the US politicians were demanding would have led
to a proportionate reduction in
rural incomes. That in turn would have led to a dramatic increase
in rural-to-urban migration, unemployment and, likely, civil unrest.
Now, however, as Mr Qing says, "the government has not only abolished agricultural taxes, it is cutting education fees in the country, and is spending much more on rural infrastructure".
This makes it easier for farmers to adjust to a revaluation.
Haizou Huang, of Barclays Capital's fixed income group in Hong Kong, points out another reason for the People's Bank of China to allow
a more rapid renminbi appreciation.
Mr Haizou says: "The consumer price index basket is very heavily weighted in food and has very little weight in gasoline. So while the [headline] CPI is around 1.3 per cent to 1.5 per cent, the extent of the inflation risk is more serious.
"The $20bn increase in FX
reserves per month generates
a lot of liquidity and this problem
is not easy to control without
further reforming the renminbi."
Steve Gilmore, who follows Chinese monetary policy for AIG Financial Products in London, believes the faster pace of appreciation and the encouragement of outward investment are beginning to reduce domestic liquidity.
Mr Gilmore says: "There are now capital outflows that are beginning to offset the trade surpluses and FDI [foreign direct investment], which is encouraging."
But he still thinks more rapid appreciation is coming. "I think the dollar/renminbi should trade at 7.70 by the year end, or about a 2.5 per cent revaluation."
Given the inherent high leverage in foreign exchange positions, it would seem that the renminbi NDFs are among the few promising positions out there for idea and profit-starved hedge funds.
I wonder how long it will take them to pile in and arbitrage away the profit.
人民币还升不升
要
想打消你对理性经济人的信念，只要看看拉斯维加斯和澳门的那些高楼就可以了。它们表明，人们会一而再、再而三地用金钱追逐白日梦。
如果你还需要更多证据，那就看看那些利用无本金交割远期外汇(NDF)市场做多人民币的人们，多年来遭受的损失吧。
与拉斯维加斯和澳门的赌客们不同，在他们的“显而易见”的赌注背后，有学术和政策学究的意见撑腰。
月复一月，年复一年，分析人士不断声称，中国再也无力吸收美元，以阻止人民币兑美元汇率大幅升值了。
但中国做到了。
对一些人而言，无本金交割远期外汇市场似乎是一个有些晦涩的领域。它之所以存在，是因为中国压制活跃的人民币交易。
“无本金交割”意味着，在这种合约到期时，人民币买家只能得到与人民币等值的美元，而这一价值是由中国“境内市场”确定的参考价格决定的。
不过，这个市场规模很大。国际清算银行(BIS)的数据显示，人民币无本金交割远期合约每日的交易规模约为7亿美元，具备流通的双向市场，交易规模为1000万美元，差价为3至5个基点。这是一个真实的市场，交易员、专业投资者和进出口商都可以通过自己的银行进入该市场。
投机者会阅读媒体上频繁出现的关于美国政客、工业家和工会官员的报道，这些人希望中国让人民币升值20%、30%或更多……否则就会采取措施之类。投机者相信这点。
那些满足于经营赌场、而非拿自己的钱去赌博的银行，愿意向投机者出售人民币远期合约。不过，人民币远期合约体现出的升值幅度，总是高于合约到期时的实际结果；看涨人民币的人士总是不得不在合约到期时补足差价。
然而，人民币形势现已发生变化。是该买入人民币远期外汇合约的时候了。我相信，这些合约即将开始有利可图了。
这与参议员或财政部长们的威胁没有关系，与中国听从黄金看涨或美元看跌人士的看法也没有多大关系（这些看涨黄金或是看跌美元的人认为，中国增加美元储备不是管理资产组合的好方法）。这完全是因为中国对国内政策的考量。
这个市场的回报会有多高？对于人民币的升值幅度，活跃的交易员设定了一系列目标区间，但消息更加灵通的人士似乎认为，实际升幅将超出远期合约价格所体现出的升值幅度。
美国银行(Bank of America)驻香港外汇策略师王庆(Qing Wang)表示：“观察一下2007年底到期的合约价格，你会发现，市场的定价是1美元兑7.85元人民币。我们的估计是，届时的汇率将为7.65元人民币兑1美元。”
为何看法会发生改变？王庆认为：“中国政府外汇政策造成的流动性过剩是关键所在。如果你试图保持兑美元的稳定，你就会造成流动性过剩。”
过去，中国政府不愿允许人民币较快升值。其中的一个关键原因，在于它可能对农村居民生活水平产生影响。
目前，中国农产品价格接近国际市场价格；美国政界人士要求的20%至30%的升值，将会导致农村收入按比例下降。这进而会导致流向城市的农村人口数量显著增长，失业水平上升，并可能造成社会动荡。
然而现在，正如王庆所言：“中国政府不仅取消了农业税，而且正在削减教育收费，并增加农村基础设施投入。”
这使农民更容易适应人民币的升值。
巴克莱资本(Barclays Capital)香港固定收入部门的分析师黄海洲指出，中国央行允许人民币更快升值还有另外一个原因。
黄海洲表示：“在消费者价格指数(CPI)篮子中，食品所占权重非常大，而汽油的权重极小。因此，虽然总体消费者价格指数保持在1.3%至1.5%，但通胀风险实际上更为严峻。”
“每个月200亿美元的外汇储备增长，产生了大量流动资金，如果不进一步改革人民币汇率机制，这一问题将难以解决。”
在伦敦为美国国际集团金融产品公司(AIG Financial Products)追踪中国政策的史蒂夫?吉尔摩(Steve Gilmoreho)认为，人民币升值步伐加快和鼓励对外投资，已开始减少国内的流动资金。
吉尔摩表示：“如今，资金外流已开始抵消贸易顺差和外商直接投资(FDI)的影响，这是一个可喜的现象。”
但他仍然认为，未来的升值速度会更快。“我认为，美元兑人民币汇率到年底时应为1：7.70，也就是说，人民币将升值约2.5%。”
鉴于外汇头寸固有的高杠杆作用，对渴求创意和利润的对冲基金而言，人民币无本金交割远期似乎属于少数几种有潜力的头寸之一。
我想，对冲基金要等多久才会大举入市并套现利润？
