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Kiwi investors take to RMB to avoid global turmoil

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Fuseworks Media
Fuseworks Media

With developed world economies suffering from too much debt and weak fundamentals, New Zealand investors have been moving to invest in emerging market currencies, such as the renminbi (RMB), rather than the traditional currencies such as the dollar, pound and the Euro.

Reflecting this view, the number of HSBC Premier customers who opened a personal RMB account over the past quarter has grown by 23%.

Glen Tonks, Head of Wealth, at HSBC New Zealand says: "This move has been a two fold strategy by customers reflecting the desire to diversify currency holdings and invest into faster growing economies with currently stronger fundamentals."

"Given that medium to long term RMB appreciation seems likely and the importance of trade and investment with China continues to grow, RMB products are becoming increasingly popular in New Zealand," he continues.

Since 2005, China has allowed the RMB peg to the USD to appreciate gradually by around 5% per year, which assists China's efforts to re-balance its growth. China is also moving to 'internationalise' its currency and aims to have a more flexible exchange rate, more market-based floating interest rates and a gradually opened capital account within the next five to ten years.

"As the centre of gravity of economic activity moves from the West to the East, transactions in RMB are expected to become far more common, with HSBC forecasting that by 2020 they will be as common as those in USD or Euro," continues Tonks.

With the turmoil in Europe looking set to continue for some time and the slowing of the US economy, Asia is shaping up as the new global growth engine and investors are looking to invest into economies with a healthier macro picture.

"If you look at the fundamentals in the Asian economies they tell a much more positive story across budget deficit, debt, economic growth, unemployment and earnings growth. We have been seeing customers investing for the future, so it is little surprise that HSBC's RMB deposits in New Zealand have grown by 32% in the third quarter of 2011," Tonks concludes.

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