Sovereign investors want larger exposure to Chinese yuan: Invesco

SINGAPORE - Central banks have a growing appetite for risk, wanting more exposure to the Chinese yuan - a view that is also adopted by sovereign wealth funds around the world, a new survey has found.

While less than 1 per cent of central bank portfolios were invested in renminbi, 43 per cent of them were interested in gaining more exposure to the currency, an annual soverign asset management study said. Thirty-five per cent of global sovereign wealth funds reported that they were seeking renminbi exposure.

The study by Invesco, released Monday, interviewed 59 sovereign investors across the globe, with assets totaling US$7.09 trillion (S$9.6 trillion). Individual investors were not named but the report included a sample from Singapore.

Confidence in the Chinese currency is built on "structural economic drivers and recent policy moves by the Chinese government", the Invesco study found.

However, it noted that "some central banks simply wanted to gain exposure to the renminbi rather than take on a meaningful exposure", given their low exposures now.

Nevertheless, sovereign investors are "early adopters" and can be seen as "lead indicators of global demand for renminbi", Invesco said.

"A strategic shift to renminbi exposure would clearly have major implications for global economics and all international investment strategies."

A number of central banks have also increased exposure to the Australian and New Zealand dollar, given the "current attractive interest rates for Australian and New Zealand debt compared to other developed markets", the report also found.

Meanwhile, central banks are expecting the US dollar to strengthen, and reducing allocations to the pound, euro and domestic currencies, said Invesco.

marissa@sph.com.sg