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13 August 2015 | all

China’s shock currency devaluation: What it means for Asian investment in European markets

Following the news of yesterday’s (Tuesday) 1.9% devaluation of the Chinese national currency, the Yuan, Joanne Jia, Head of Investment (Asia) at Christie + Co looks at the implications for Asian investors looking to invest in the UK and European market.

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“Whilst the Chinese central bank, the PBoC, has today sought to reassure against a prolonged fall of the Chinese currency, commentators have pointed to the slowdown of the Chinese economy as a cause of the fall. For Chinese companies, those with foreign currency debt will be affected by these changes as they will have to pay more interest, however we have seen from our dealings with Asian clients that there is a strong appetite to invest in the UK and Europe, particularly in premium brand hotels and we anticipate that this will continue albeit at a potentially slower rate. For new Chinese investors to the UK or European market two days of a drop in the currency is unlikely to affect their decision to invest, indeed it may encourage Chinese investors to allocate more assets overseas for risk diversification and wealth preservation reasons, and as the volume of Chinese travellers to the UK and Europe continues to rise it remains an attractive investment opportunity.

Adjustment  is a necessary reaction to over exuberance and the typical herd mentality that precedes this type of declines, but the overall growth potential for China as a whole remains strong. These are growing pains and not a permanent impairment.”
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