Winners And Losers From Tuesday's Yuan Devaluation

Traders and markets win. The PBOC is now going to have to chase the market and if reserves flow out faster or Chinese citizens join the trade, things could turn ugly quickly.

Financial Review: We won't devalue currency China's PBOC told fund managers
"They stuffed it up big time," says the fund manager. Rather than being seen as a genuine effort at reform the "adjustment" it is being viewed by many as the first step in a sizeable devaluation, a currency war even.

The markets have reacted accordingly and are pushing the yuan lower. This is likely to force the PBOC to be more heavy handed in setting the daily fix at least in the short term, which is the exact opposite of what it hoped to achieve.

This is likely to continue until the market gets the message. But it's not just the credibility of the PBOC and its private briefings which is on the line if Beijing really is in the process of a major devaluation.

The credibility of China's top economic official, Premier Li Keqiang will also be shredded.

In April he could not have been more definitive on the subject during a rare interview with the FT.
Who are the winners and losers from devaluation?

iFeng: 人民币贬值几家欢喜几家愁 谁是此次风暴的赢家和输家
Losers No.1: China Airlines

Chinese airlines for most of the debt in U.S. dollars. Weak renminbi will increase their debt costs and reduce profits.

China Eastern Airlines stock plummeted 16 percent, the biggest decline in seven years.

Losers No.2: European luxury sellers

As the EU's largest trading partner, China and its growing middle class to promote the luxury market is booming in Europe. Germany devaluation makes steam cars , Swiss watches and French handbags more expensive for Chinese buyers.

BMW 's stock fell 4.3 percent Tuesday. 2014 19% of the company's revenue comes from the Chinese market. China also accounted for about 10% of Daimler AG (Daimler AG) sales.

Louis Vuitton (LVMH) shares fell 5.4%. Last year, 29 percent of the company's sales come from Asian countries, excluding Japan.

Losers No.3: commodity manufacturer

Including devaluation makes the cost of imports, including commodities rise. The world's largest iron ore producer CVRD (Vale SA) shares fell 8.3%. The company's second quarter 37% of revenue comes from China.

Last year, Chinese imports accounted for 35% of Australian mining companies BHP Billiton (BHP Billiton) in sales, accounting for 38% of Rio Tinto (Rio Tinto Plc) sales.

Losers No.4: Asian currencies

Devaluation will increase the competitiveness of Chinese export enterprises. Tuesday all major Asian currencies have depreciated, due to market concerns about devaluation will make policy-makers in these countries reduced currency of the country in order to increase the competitiveness of the country's enterprises.

Winner: China's export enterprises

Overall, China's export enterprises benefit from devaluation. Chinese mechanical engineering company shares rose on Tuesday as high as 5.9%, Lenovo Group shares closed up 2.9%. The two companies more than 65% of its revenue from overseas sales.

According to General Secretary of the Chinese Association of Automobile Manufacturers Dong Yang said in the past few years, China's auto exports slowed, the yuan weak to make Japan and South Korea compete for advantage in price. China's largest automobile export enterprises Chery Automobile Co., Ltd., chairman Yin Yue expressed support for the devaluation, because it will stimulate the company's overseas sales.

Hong Kong-based Li & Fung trading company shares rose 5%. The company exports to the United States and Europe, Chinese-made clothing and toys.

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