Chinese Stocks Tumble As Offshore Yuan Surges Most In 2 Months After Apparent PBOC Intervention

Update – Chinese stocks continue to plunge…

Aside from 3 very small adjustments, The PBOC has fixed the Yuan weaker for the last 20 days, driving the mid-line to 6.3962 – the weakest since August 28th.

Which was followed bya massive intervention sending Offshore Yuan 0.35% higher and crushing the Onshore-Offshore spread…

Just ridiculous that PBOC is intervening in CNH hours before IMF adds a “free market” Yuan to SDR

— zerohedge (@zerohedge) November 30, 2015

As Offshore Yuan strengtnens most in 2 months…

After Chinese stocks collapsed on Friday, they are holding the losses for now as the biggest question remains just what the weighting will be for Yuan inclusion in The IMF’s SDR basket (which looks set to be announced tomorrow – US time).

Although none of this is likely to end well unless China unleashes something big…

And metals continue to collapse…

*SGX ASIACLEAR IRON ORE FUTURES DROP 3.7% TO $39.29/TON

And brokerages…

Haitong Securities -9.2% after being suspended Friday amid CSRC probe; Citic Securities -1.7%

But the biggest question surrounds The IMF’s decision today (tomorrow) over yuan inclusion in SDR basket (and the actual currency weighting).

IMF’s calculation, based on value of exports of goods & services, suggested a 14%-16% weighting in the $280 bln basket. The yuan fell to a three-month low on Nov. 27 on concern it may have only 10% share of the SDR as formula expected to change, analysts said.

A 10% or less weighting will lead to selling, says RBC strategist Sue Trinh. Yuan fell 2.95% ytd, the biggest decline since 1994, as economy slowed and PBOC devalued the currency in Aug. PBOC could widen trading band to 3% or 4% after SDR entry, says Xu Yuehong, analyst at Bank of Communications.

Market expectations:

Eddie Cheung, Hong Kong-based FX strategist at Standard Chartered:

5% of world FX reserves will be in RMB by 2020, with 1% allocated annually to the currency, or $85b of inflows each year; may support Chinese bonds

USD/CNY at 6.50 by end-2015; 6.55 in 1Q 2016; 6.42 end-2016

Likely weighting of 10% in SDR basket based on expectation IMF will change formula and cut export focus