Ashmore sees buy opportunity in China

Emerging market debt specialist manager Ashmore believes that any weakness in the renminbi should be seen as a buying opportunity, given the long-term potential of China.

Ashmore head of research, Jan Dehn, said: “China’s RMB is going to be one of the only reserve currencies not buoyed by QE and is likely to be the strongest currency in the world over the next decade, in our view.” Dehn added that China is reforming its economy, and feels it has huge consumption growth potential due to a very high – 49% – savings rate. Dehn said he believed that China is now taking steps to counteract the appreciation of the US dollar and the fact it operated a currency peg to the US dollar, and believes that markets are drawing the wrong conclusions from the recent devaluation by China. “The markets are now extrapolating all kinds of scenarios, including global deflation implications, etc. Some are speculating that China has joined the race to the bottom in currencies. This is wrong. China is not going to sacrifice its macroeconomic health in some massive global currency war that ultimately is self-defeating. China has its eyes on becoming a global reserve currency.”