Removing the renminbi's (RMB) peg to the dollar will draw investor attention to China and make the geography a more viable investment, according to IFAs and investors.

"An appreciating RMB will put China back on the radar for investors, and will also be positive for liquidity flow and therefore the stock market," Fen Sung, manager of Premier Asset Management's China Enterprise Fund said.

He added that the changes to the currency, which were announced last weekend, will also be a boost to Hong Kong, as mainland shoppers flock over to snap up bargains.

"China shares over the last five years have traded on an average price-to-earnings ratio of 15x, and they are currently trading on about 13x for 2010; so my view is that the Chinese market is not expensive, boosting my fund", he said.

Sung's fund has outperformed its IMA Asia Pacific Excluding Japan sector since its launch in June 2008.

Performance of fund vs sector since launch



Source: Financial Express Analytics

Sam Owen, at Beckett Financial Services, agrees that investors will be drawn to China.

"The move certainly supports the investment case for investing in China and the Asia region as a whole. Increasing its currency flexibility sets it on the path to policy normalisation, and better reflects market supply and demand. It shows China is more confident in the global recovery and its own economy, which is positive for risk appetite," she said.

The move, which comes ahead of the G20 summit, is a confidence-booster for investors, showing the resilience of the region's economies despite the ongoing headwinds faced by southern Europe, Adam McCabe, portfolio manager for Asian Income at Aberdeen Asset Management, says.

"Overall, this is a positive gesture, as it recommits China to currency policy flexibility, potentially builds Chinese credibility in the international community and re-emphasises the likely resilience of China and the region's economies. On balance it will be seen to be a net positive for equities, commodities and risk generally as we recover from the European based sell-off in May," he said.

Stephen Ma, portfolio manager of the Fidelity China Opportunities fund says the RMB reform will boost domestic consumption, cut the risk of trade frictions with its big trading partners like the UK and the US, as well as reducing imported inflationary pressures.

"RMB reform will help China to refocus its growth from an export driven economy to a domestic driven in the long-term, providing further support to the consumption theme in my portfolio," he says.

Justine Fearns is a research manager at AWD Group. She agrees abandoning the dollar peg helps draw attention to the region.

"It should also help the Asia region in general as countries are better able to compete against one another, and other currencies appreciate. This all aids the longer term drivers that investors have bought into and could be seen to further strengthen the investment case," she said.
 
McCabe, however, issues a warning to investors: "There is a risk that investors will over-react, as there is no guarantee that we will see meaningful appreciation in the renminbi in the next three to six months."