Factbox: Winners and losers from a firmer yuan

Mon Jun 21, 2010 5:19pm EDT

A teller counts yuan banknotes at a China Merchants Bank branch in Ganzhou, Jiangxi province, June 21, 2010. REUTERS/Bobby Yip

A teller counts yuan banknotes at a China Merchants Bank branch in Ganzhou, Jiangxi province, June 21, 2010.

Credit: Reuters/Bobby Yip

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(Reuters) - China's signal it will let its yuan currency appreciate is good news for global manufacturers and resource companies that supply the world's third-biggest economy with the equipment and commodities it needs to fuel growth.

On the other hand, it could dampen the outlook for China's own exporters and commodity producers. A relatively mild yuan appreciation against the dollar of about 5 percent would cause losses at these companies, according to a Reuters poll conducted at China's top trade fair in April.

Following is a list of some likely winners and losers from any yuan appreciation.

FOREIGN RESOURCE COMPANIES - WIN

The shares of Brazilian mining giant Vale SA traded in New York rose 3 percent and were the seventh most actively traded issue on the New York Stock Exchange on Monday.

Freeport-McMoRan Copper & Gold Inc was also up 3 percent and was among the 15 most active stocks in New York.

In Canada, base metal producers Inmet Mining, First Quantum Minerals Ltd and Teck Resources all rose on Monday on hopes China's move would increase its resource imports.

FOREIGN HEAVY MACHINERY MAKERS - WIN

The world's largest maker of earth-moving equipment, Caterpillar Inc, could be a major winner. The U.S. machinery giant sells billions of dollars worth of machinery and products to China each year. Its group president said on Saturday that Beijing's move would help lift U.S. exports.

Second-ranked Komatsu Ltd said every 1 percent rise in the yuan would boost its operating profit by 1.1 billion yen ($12.1 million).

Caterpillar shares were up 0.4 percent late on Monday and Komatsu rose 4.6 percent in Tokyo.

FOREIGN AUTOMAKERS - WIN

Foreign automakers that sell cars in the world's largest vehicle market, such as BMW AG, Volkswagen AG, General Motors Co, PSA Peugeot Citroen, the Renault-Nissan alliance and Fiat SpA, should also gain.

BMW would benefit the most if the yuan continues to rise against the euro -- an outcome that is far from certain -- as its auto manufacturing joint venture with Brilliance China imports about half its parts, mainly from Germany.

BMW shares were up 2.7 percent, Volkswagen rose 1 percent, Renault rose 3.6 percent, Nissan rose 2.8 percent, Fiat fell 0.2 percent and Brilliance rose 4.8 percent.

CONSUMERS, TECHS - WIN

U.S. companies such as General Electric Co and Procter & Gamble Co are likely to make currency exchange gains when their China profits are converted into U.S. dollars.

A spokeswoman for GE, which makes many of the products it sells in China in that country, said the U.S. conglomerate does not expect "any material impact" to its earnings from the change.

Credit Suisse analysts estimated every 10 percent of appreciation of the yuan versus the dollar would boost the revenue and earnings of U.S. electric equipment makers by about 1 percent.

PC maker Lenovo Group Ltd, which earned 47 percent of its sales in China in 2009, reports earnings in U.S. dollars. Lenovo shares were up more than 5 percent on Monday.

Yum Brands Inc, which owns the KFC and Pizza Hut fast-food chains and generates more than one-third of its profits from its 3,500 locations in China, regards the move as good news, said spokesman Jonathan Blum.

"China represents our No. 1 growth opportunity and we expect this to be a very positive development over the long-term," Blum said.

No. 1 chipmaker Intel Corp expects limited effect from the change, a spokesman said.

"All of Intel's transactions worldwide are conducted in dollars so the effect of currency fluctuations is not a direct one on the company," said spokesman Tom Beermann. "There would be secondary effects if currency valuations caused demand for our products (or products that use our chips) to increase or decline overseas."

Shares of Baidu Inc, China's top search engine, were up 2 percent on the Nasdaq. GE was up 1 percent, Procter & Gamble was down 1 percent, Lenovo rose 5.2 percent and Yum rose 0.4 percent.

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Comments (13)
cosmos_roamer wrote:
why should we concede to the pressure from US lead capitalism countries?

Jun 21, 2010 10:06am EDT  --  Report as abuse
screenname12 wrote:
You forgot to mention the more than 1.3 billion Chinese people who will gain from increased purchasing power as a result of the stronger yuan.

Jun 21, 2010 10:25am EDT  --  Report as abuse
it’s actually not US pressure….it’s GLOBAL pressure.

The whole world has been complaining about the undervalued RMB for years now. You may not be able to read about it in state censored media in China, but the whole world has been complaining about the RMB.

(ok,…Iran, N Korea, Sudan, Venezuela, Cuba, and Burma have not been complaining, but I think we all know why they don’t complain).

Jun 21, 2010 10:48am EDT  --  Report as abuse
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