# Buying Chinese Yuan (RMB)



## Matsugawa (23 Mar 2010)

Hi

As a long term investment can anyone advise on the best way to purchase Chinese Yuan?

Obviously going into a Bureau De Change isn't good for anything other than "walking around money" as you have the risk of storing it. Doubly so as it would be a mid- to long term investment.

Any suggestions or thoughts on this?

The reason I ask is that it seems a good third option against the euro and dollar (I have investments in both) and seems to be considered to be undervalued.


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## ringledman (23 Mar 2010)

Euro is well overvalued on the global stage. 

Buying the Yuan, there are not many options. There is an ETF called Wisdom Tree Chinese Yan Fund.

Problem is you have to take the risk of it being an ETF (grossly underestimated risks in owning ETFs IMO by most investors) and it is dollar denominated so currency risk.

Short term China is in no rush to raise their currency. They don't give two hoots what the USA think and rightly so.

A long term investment play is the Yuan. Personally I think; Chinese equities are probably the best way but currently overvalued I feel.


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## Matsugawa (23 Mar 2010)

Thanks - I thought that might be the case. Have looked into Chinese stocks (as ADRs) but unfortunately I'd be buying them in USD...the lord giveth and the lord taketh away!


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## Chris (24 Mar 2010)

Some of the larger Chinese companies are also traded on European exchanges.


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## ALBERT* (24 Mar 2010)

ringledman said:


> Euro is well overvalued on the global stage.
> 
> Buying the Yuan, there are not many options. There is an ETF called Wisdom Tree Chinese Yan Fund.
> 
> ...



Hi Ringleman,
could you expand a little on this pt as I'm currently thinking of buying efts and would be v interested in the downsides ?


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## ALBERT* (24 Mar 2010)

Matsugawa said:


> Thanks - I thought that might be the case. Have looked into Chinese stocks (as ADRs) but unfortunately I'd be buying them in USD...the lord giveth and the lord taketh away!



If you are buying a Chinese company in USD does that mean you are exposed to both currencies or just the one? Confused!


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## Matsugawa (24 Mar 2010)

@ALBERT - If I buy ADRs in USD then I have an exchange risk. If my stocks go up 30% but the dollar drops against the Euro then any gains are undermined. A stronger RMB might result in a stock going either way (a stronger RMB is bad if you are a Chinese exporter for instance) - at the end of the day I haven't really bought any RBM as a currency, just Chinese stocks in USD. And I think Chinese stocks are overvalued at the moment.

And what I wanted to do was buy RMB with my Euros because the RMB will, most likely, rise in value in the long term.


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## ringledman (24 Mar 2010)

ALBERT* said:


> Hi Ringleman,
> could you expand a little on this pt as I'm currently thinking of buying efts and would be v interested in the downsides ?


 
Albert please see the following - 

[broken link removed]

[broken link removed]

Personally I prefer very cheap index trackers to ETF's. 

Firstly ETFs are usually dollar denominated. Why go long the dollar which is a flawed currency long term...

Also ETF's which are in £ or € do not hedge against exchange rate movements against $ held assets! This is a myth. People buy a £ or € ETF and think it hedges against the dollar assets it invests in (i.e. for commodities traded in Chicago Exchange). They don't. Also some of these £ or € ones charge you twice, once to convert to dollars then back again! Better to invest directly into the dollar one to start with! This is my understanding.

Also, any product that is overly complex as an ETF is in my opinion potential to have problems. I like simple products. Especially so after the frauds discovered in the past crises. 

Do I want to hold an ETF for 20 years? Not sure... Trading fine. Long term not so sure. 

I hold a number of ETF's but am very careful about buying any more. 

Also you can have a problem with contango on some commodity ETFs - http://seekingalpha.com/article/193473-natural-gas-etf-in-freefall-new-driver-same-result

HSBC and L&G here in the UK offer trackers for as low as 0.25% annual management charge.

ETFs - Read the small print! What exactly are they invested in??? I'm not always sure!


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## ringledman (24 Mar 2010)

I hold a Vietnam ETF and believe it doesn't actually invest directly in any Vietnam stocks due to the 'swap nature'. Will try and find the article explaining this.


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