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Pensions’ Gayed Says Yuan Band Move Will Be Cheered by Markets

Michael Gayed, chief investment strategist in New York at Pension Partners LLC, which advises on more than $150 million in assets, including Chinese shares through exchange-traded funds, comments on China widening the yuan’s trading band for the first time since 2007 and the possible impact on markets.

He sent his comments in an e-mail:

“There are two possible scenarios here. Either the yuan weakens, which in turn would be stimulative to China’s slowing economy as exports increase, or the yuan strengthens, which would potentially damp domestic inflation and which, in turn, would allow the People’s Bank of China to further stimulate as a counter measure.”

“Either outcome may be seen as a net positive in the short term, as markets cheer more market-oriented currency measures.”

On the reaction in Chinese stocks:

“While it appears that we are in the midst of a mini-correction in risk assets, China appears to be on the verge of outperforming the U.S. It does not mean stocks have to go up, but simply that they could go either up more or down less than U.S. markets as a result.”

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