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WisdomTree Chinese Yuan Strategy ETF Message Board

  • haroldstairs haroldstairs Apr 8, 2010 6:06 PM Flag

    3-5% increase over 1 year...

    If the Chinese gov. only allows for this amount of currency increase, what type of annualized return do you think we will get?

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    • CYB is such a misunderstood thing.

      It buys futures and other financial instruments that either buy or sell yuan at some relative value at some point in the future. If the yuan is expected to be at the same rate six months from now, those futures are flat. Thus the return for CYB will be nothing on the yuan appreciation plus what it makes on its short term investments - and those are in U.S. T-bills paying .18% interest - not money market funds in China.

      Let's say China does a quick 5% one-time revaluation. The value of the six month futures just increased 5% overnight, so CYB could jump 5%.

      Now lets see what happens if China adopts a 1/2% increase in the yuan each month for the foreseeable future. The value of any outlying contracts for CYB increase by the expected percent amount at the time that they are due. Thus any contracts due one month later would be worth 0.5% more. The actual return for CYB will be based on the number of contracts they hold and the length of time they hold them. Thus the longer term contracts would appreciate more than the shorter term contracts.

      However, once the Chinese establish that base rate of increase, any NEW contracts that CYB purchases will already assume that rate of increase and will be priced accordingly when CYB buys them. Thus the only thing affecting the price of CYB from that point forward would be the short term investment yields once again.

      Thus the short term strategy for CYB is to buy and hope for a yuan re-valuation (either one-time or incremental) giving you a 3 to 5% jump. CYB will likely never drop much below $25, as the dollar is not likely to appreciate against the yuan - so it is a safe place to sit and wait if you don't mind a low rate of return.

    • What they say is one thing; and what they do is something quite different.

      The U S Govt., esp. the Congress is mad & want quick results on Yuan Valuation ( Upwards). The Chinese are rightly scared of the wrath of the U S Congress; and will mollify them with a quick 5-10% UP VALUATION.

      Then CYB will then, go up 5-10% ( I state the obvious, before someone asks)

    • I don’t think it will be 3.5 percent for the year. Inflation in china will cause higher interest rates. Yuan has to appreciate more than 3.5 percent. I would say it will be about 10-15 percent. Then I think Yuan will settle down (stay flat). My goal is to settle in china maybe permanently. So I may have to convert half my money. I will buy only because I think I will not be able to retire in USA, very high cost of healthcare and having no job is making me think about moving to china; maybe become citizen of china if I start to like it there. Not advising, do your own homework.

      I just see USA losing jobs and cutting budget every year. I see China India Mexico will continue to take jobs away. Outsourcing will not help. Housing is seeing pressure.

      So while USA is contracting china is still expanding. In fact violence will increase in USA as people have no money (like Detroit).

      Maybe time to say Bye Bye USA,

    • 3-5% in a year!?? I would rather watch trees grow! Or better yet, buy BIDU and triple your money!

    • .
      I'm going to take a wild guess...of 3-5%

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