SHANGHAI - There is a greater probability of yuan appreciation in the second quarter as China steps up curbs on home loans to help deter speculative capital inflows, China International Capital Corp (CICC) said.
The State Council said last week banks should stop loans for third-home purchases and suspend lending to buyers who can't provide tax returns or proof of social-security contributions. Imports exceeded exports by $7.2 billion in March, leading to the first trade deficit since 2004, official figures show.
The property rules will "help lower risks of hot-money inflows once the yuan's appreciation resumes", wrote economists led by Hong Kong-based Ha Jiming at CICC, the first Sino-overseas investment bank.
"There is going to be an even higher probability the yuan will rise after the trade deficit turns into a surplus in May and June."
Twelve-month non-deliverable yuan forwards declined 0.2 percent to 6.6310 per dollar as of 3:21 pm in Hong Kong, reflecting bets the currency will strengthen 2.9 percent from the spot rate of 6.8258, according to data compiled by Bloomberg.
China may allow the yuan to appreciate by June 30 to curb inflation, while avoiding a one-time jump in value that might hurt exports, according to a Bloomberg News survey of 19 analysts last week.
Surging asset prices and speculation about currency appreciation have led to speculative capital inflows into China, adding pressure on policymakers to prevent the economy from overheating.
China seeks a "stable yuan" to control hot money flows, and the government is monitoring foreign capital in the property market, Commerce Ministry spokesman Yao Jian said on April 15.
Property prices surged 11.7 percent in March from a year earlier, the most since records began in 2005, government data showed on April 14.