June 22, 2010 – What The Yuan Realignment Means For You

Featured Trades:  (CHINESE YUAN FOLLOW UP),
(BTU), (FCX), (X), (FXI), (YCS), (YEN)
iShares FTSE/Xinhua 25 China ETF
ProShares Ultra Short Yen ETF


4) What The Yuan Realignment Means For You. Since it’s rare that we get a realignment as significant as the revaluation of the Chinese Yuan, I thought it would be interesting to review the global market response. The one liner is that the price of anything that the newly enriched Chinese buy has gone through the roof. Look at the charts today of their biggest imports, which include coal, with Peabody Energy (BTU) jumping 5%, copper, with Freeport McMoRan (FCX) up 7%, and US Steel (X), popping 7%. The Chinese stock markets had a great day (FXI), as the imminent death of the peg removes a great deal of uncertainty from the market place and helps tame runaway inflation. It also gives the domestic demand story a boost as all imports have suddenly because cheaper, crucial for the country’s long term economic future. NASDAQ also initially had a good day, as its major components all have major operations in the Middle Kingdom which are now more valuable. Who was the big loser? Japan, which now has a larger and more formidable competitor on its doorstep, and saw its currency (YCS) plunge ¥1.5 against the dollar (kaching!). Keep in mind that a stronger Yuan is not just a one off, but the beginning a major long term trend, and we can expect the same from its many beneficiaries.

Peabody Energy Corp


Freeport McMoran Copper&Gold


USX-US Steel Group, Inc.


iShares FTSE/Xinhua China 25


Yuan22.jpg

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