FXStreet reports that economists at Capital Economics think China’s economy slowdown – in the face of surging economic activity in much of the rest of the world – has three implications for China’s financial markets. 

“We expect the country’s stock market to continue to underperform those elsewhere. It has already fared relatively poorly so far this year as domestic economic growth has slowed, and as investors have begun to factor in an unwinding of the boost its large information technology sector received from pandemic-related demand. We suspect these factors will continue to weigh on earnings growth in China’s stock market for some time and doubt there is much scope for this to be offset by higher valuations, either.”

“We expect the renminbi to depreciate against the US dollar. We suspect the dollar’s recent broad-based weakness will prove temporary. And we think the fundamentals point to a significantly weaker renminbi. The upshot is that we forecast the renminbi to fall to 6.7/$ by the end of the year, compared with ~6.4/$ at present.”