Recent Chinese data continues to get worse. Whether it was the July Caixin Manufacturing PMI which came at 49.8 against 51.5 estimates, the July export data which came at 7% YoY against 9.5% YoY estimates, the aggregate financing YTD which too came lower, new CNY loans lower again, industrial production & fixed asset investments lower again & unemployment ratio coming more than expected. With no fiscal support coming, and monetary policy working in 1 step forward-2 step backward mode, CNH looks significantly overvalued in terms of both growth differentials as well as interest rate differentials. In addition, we see tariffs returning from US on Chinese goods irrespective of who wins. More so if Trump wins. With political event risk rising ahead of US presidential elections, we see CNH pulled towards 7.30 levels first than a sub 7.10 level.
