Last week, most of the focus was on China. For a start, China’s money market rate jumped and that caused some nervousness in financial markets. The central bank is restricting liquidity as recent signs of buoyant credit prompted it to guard against the build-up of excesses. This is in line with our view that China’s growth is unlikely to rebound strongly. However, China’s PMI came in above expectations and this supported the overall market sentiment again. So both events had an opposite impact on Asian currencies. The Chinese yuan continued its appreciation path reflecting expectations of more liberalization in the coming year. The central bank said that it is starting to use the loan prime rate to promote interest rate liberalization, improve the benchmark-rate system in financial markets and guide credit-product pricing. The CNY remains our Asian top pick because of strong fundamentals, expectation of more liberalization and its relative resilience to global and regional uncertainty.