Chinese billionaires have been on a buying binge in the US. This is partly due to slower economic growth in China and a perception that the RMB will continue to devalue.

Looking at the USD/RMB chart here, the strengthening of the  USD to RMB can be seen to have begun from 2014 or so. And so the acquisition of US companies began. Some of the acquisitions that have occurred so far are:

  • ChemChina’s acquisition of Syngenta
  • HNA Group buys Ingram Micro for $6 bill
  • Blackstone to sell Strategic Hotels & Resort for $6.5 billion

and more…

In my opinion, George Soros’s theory of reflexivity is applicable here and can explain partly the devaluation of the yuan versus the usd and other currencies. The “perception” that RMB will devalue relative to other currencies causes the behaviour of investors to seek protection against devaluation. And one of the best ways to seek protection is to buy US based assets. This behaviour of buying foreign assets will in turn cause the RMB to devalue further relative to the USD . The same can be seen in the Euro/RMB chart.

Clearly the Euro has strengthened with respect to the RMB as well.

This devaluation of the RMB will in turn act to affect the behaviour of other market participants. In the end, what have we? A fall in the value of RMB relative to the USD and other currencies.

 

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kingsley

I have been an investor for 15 years now and my journey has meandered from Warren Buffett to Ben Graham. My start, like many, really was the naive idea that Buffett's skills could be replicated in some fashion. I was proven wrong when some of the supposed stock picks that I chose had dismal performances. Then, I learnt that it is no point trying to be someone I am not. Gradually, through failure and some success in deep value investing, my approach towards stocks gradually shifted to an approach based around Graham's techniques. So, I give credit where credit is due and to Ben Graham, I and many other investors around the world, owe him a great deal. So, if you want to read up on biographies, read about Ben Graham. His seminal work, Security Analysis is a gem. My books are just rich interpretations of what he has taught.

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