Goldman Sachs see further yuan weakness

Goldman Sachs with a client note written on Friday. Bloomberg reporting.

• Chinese yuan probably not far off its fair value but should weaken further on cyclical factors
• large debt overhang from rapid growth in credit extension in recent years will likely imply lower interest rates and consequently add to depreciation pressure
• previous build-up of Yuan's TWI appreciation over many years has weighed on export growth
• estimates that capital outflows totalled $550bln in H2 2015 of which 30% was for fx debt repayments, about 60% because of Chinese residents buying fx assets
• outflows could remain around $700bln in 2016
• fx reserves of $3.2trln look adequate by most metrics, except for those related to M2, estimates at least $2trln resides in liquid assets
• baseline view of USDCNY of 7.0000 at year-end is based on expectation that RMB will be largely stable against CFETS basket

An early-week fix of Goldmans for those of you who just can't get enough of them.