Depreciation of Renminbi Against the U.S. Dollar will See Selling of More Foreign Funds
The depreciation of the renminbi against the US dollar will see more foreign funds to be selling assets in Beijing. Those selling are the ones with holding periods that were extended for another short period of time. In the past week the yuan 1.5 percent against the US dollar the largest weekly decline since August. A chief economist for ANZ greater China region stated that the short term volatility of the yuan is due to the rising anxiety over the weakening of the currency that triggered capital flight.
The weakening of the yuan is also influenced by the start of a new rate hike cycle in the U.S. which is paired with a slow Chinese economy with the growth in 2015 expected to register at its slowest pace in a quarter of a century. Kevin Qing the head of Capital Markets for North China at international consultancy firm JLL also said that the Chinese yuan inclusion in the Special Drawing Rights last December is expected to result in more movements in the exchange rate with changes to the US dollar exchange rate affecting investor behavior in 2016. For foreign funds already holding assets in China they will be off loading their assets as soon as possible as the currency rate exchange is not in their favor.
This will result in more buying opportunities as building appear for sale, which is good news for other funds that are already under pressure to invest in value added opportunities as more foreign investors looks into China. Also this time a weak exchange rate might trigger more outbound investment by investors that are willing to preserve the value of their portfolios by grabbing more exposure to other currencies. There is an increasing number of smaller property developers and entrepreneurs speeding up their pace in investing in Europe and the United States which expands to other non traditional cities such as Miami, Berlin, and Frankfurt.
Office space still remains the hottest sector in Beijing as much of the interest shifted outbound as investor are looking to diversify even with the uncertainty in the Chinese market under the economic slowdown made it harder for investors to reap the same rewards like they previously did. As office rental growth outlook softened, pricing is still to be taken in account and prices are still high. Investors that made bad investments were used to be saved by a good market and favorable currency situation which his no longer the case, decisions are much more complicated and while there still interest in the market there is hesitation as investors need to see stability in cash flow and a clear exit strategy.