US dollar likely to rise

The US dollar would likely rise next year as the European debt crisis prompted investors to flee the euro since the euro debt crisis is deteriorating.

Credit Agricole last week revised down its forecast for yuan appreciation to 3 per cent next year, from 5 per cent earlier, on the assumption of 8 per cent mainland economic growth and 3.4 per cent inflation for China next year.

Andrew Fung Hau-chung, executive director and head of treasury and investment at Hang Seng Bank, said A stronger US dollar would mean the rate for the appreciation of the yuan would slow down, Fung said. The yuan may well be flat against the US dollar next year.

Brokers said this would cut down investors' interest in trading yuan products, which might affect some listed companies' interest in issuing yuan-denominated shares.

The first yuan initial public offering in the city - the Hui Xian Real Estate Investment Trust, a spin-off of Li Ka-shing's Beijing Oriental Plaza - had a lacklustre market debut, down 9.35 per cent on its April launch.

Yuan bonds have had a better reception, with 99.1 billion yuan (HK$121 billion) worth of dim sum bonds - yuan-denominated bonds issued outside China - issued in the city in the first 11 months of the year. That is nearly three times the 35.8 billion yuan issued last year.

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