Wary of dollar-medium rally causing hot money to flee

Hot money keeps betting on rising domestic asset prices Mr. Sun, who works for a foreign investment bank, has been a little busy lately. A Swiss company is looking for a joint-venture real-estate company in the country seeking a withdrawal from a foreign shareholder to allow the Swiss company to take over some foreign shares. "Once this is done, the company can transfer money from abroad to the mainland by applying for a new real estate project," he said. This is also to find the reasons for real estate enterprises, if it is industrial manufacturing enterprises, not only the government project approval of the difficult, long cycle, and not like sitting on the land so easy to make money.　　"said Mr. Sun. According to his introduction, recently to find him to do similar things a few people. "The US fund also wants to get the money in through the investment bank's currency swaps," he said.　　"The cost of US funds is about 5% per cent of the total, but the appreciation of the renminbi and the return on domestic asset premiums are enough to offset the costs," Mr. Sun said.　　This is only a microcosm of hot money flowing into China ——— although the size of this part of the money can not be calculated, but it actually happened around us. At the end of the three quarter, China's foreign exchange reserves amounted to $2.2726 trillion trillion, up 19.26% per cent year-on-year, according to central bank figures. The three-quarter trade surplus of 39.3 billion U.S. dollars, foreign direct investment of 20.8 billion U.S. dollars, the two data and the three-quarter 141 billion U.S. dollars in foreign exchange reserves of the new balance of more than 80 billion U.S. dollars.　　Even considering the investment income and exchange rate changes in foreign exchange reserves, the number that cannot be explained is still not small. The international capital inflows now facing China are more complex than the wave of "hot money" before the financial crisis. Zhou Yi, general manager of Monetta Investment Development Co., said the crisis had superimposed the impact of the US dollar carry trade triggered by the Fed's low interest rate policy. The dollar carry trade refers to an investment by speculators who borrow dollars and convert them into emerging market currencies.　　The recent dollar interest rate is close to 0 per cent, far below the interest rates in most emerging markets, and the cost of arbitrage is low and yields high. Behind the arbitrage fund is the liquidity created by the low interest rate policy, "Zhou Yi said," because China is more likely to be hit by long-term structured capital under the new global capital flow model, given its obvious advantages over other emerging market countries, both in terms of both economies and growth. "It is alarming that the nemesis of the arbitrage trade is the sudden appreciation of the dollar." Once the dollar rises abruptly, the price of China's a-share market and other asset prices in China must also be under pressure. The dollar is likely to rebound.　　The "good performance" of the November U.S. employment data, released December 4, has led to a sharp jump in the dollar, with several research institutions and academics, including JPMorgan, expecting a rebound in the dollar in the medium term, a rebound that will increase the risk and harm of hot money coming out of the country. "In the former crisis period, the inflow of hot money in the domestic, a considerable proportion of the funds are based on China's economic growth prospects, one-way trend into the domestic, this part of the capital in a certain time span does not exist obvious outflow pressureForce。 The liquidity and profit-benefit of the arbitrage-traded capital are strong, under the driving force of asset price inflation expectation, when asset price bubbles in the inflow countries are too high, it is likely to flow out in a short time, leading to a complete reversal of the bubble environment, so this part of the capital is more dangerous.　　"Zhou Yi said. Lu Qian, an associate professor of international finance at Fudan University, said that if hot money flowed quickly, asset prices could fall rapidly and banks ' non-performing loans could rise rapidly, which must be guarded against.