Obvious beneficiaries of the yuan revaluation are companies such as Chinese airlines and power producers burdened with foreign debt, as a stronger yuan will translate into a reduced absolute debt load and lower interest expenses. The airlines will also benefit from a modest reduction in jet fuel prices when they refuel at foreign airports. Hong Kong-listed China Eastern, for example, has 66.5 per cent of its debt denominated in US dollar and another 10 per cent marked in other foreign currencies. Its combined dollar debt and lease obligations amounted to US$1.87 billion at the end of last year. Rival China Southern Airlines had long-term loans and leases denominated in US dollartotalling US$2.2 billion. 'Other things being equal, we calculate that a 2 per cent appreciation of the yuan exchange rate against the US dollar will lead to a 70 million to 200 million yuan increase in the recurrent earnings of the three Chinese carriers for 2005,' Morgan Stanley projected in a report released yesterday. Another set of winners includes mainland refiners and petrochemical producers such as China Petroleum and Chemical (Sinopec), Asia's largest oil refiner, whose stock price surged 5.7 per cent yesterday. A Sinopec spokesman yesterday confirmed what many investors believed: a mightier yuan would translate directly into lower crude oil procurement costs. About 79 per cent of the 133 million tonnes refined by the company last year was imported. With an average procurement cost of about US$38 a barrel, its import bill would have amounted to about 232.17 billion yuan last year. 'The impact of yuan appreciation will be felt most in refining because of market US-dollar-denominated oil prices and regulated yuan retail prices for gasoline and diesel,' JP Morgan said in a report. The bank raised its forecast on Sinopec's earnings for this year by precisely 2.1 per cent. Revaluation losers include commodity players such as steel, copper and aluminium producers, as they will now be competing with cheaper imports. Daiwa Securities metals and mining analyst Geoffrey Cheng Bik-hoi said the currency appreciation would make China's coal and aluminium exports more costly, thereby increasing domestic supplies and weighing on domestic prices.The impact on the finance sector, which remains relatively insulated, is likely to be minimal. Bank of China, with about 45 per cent of its assets denominated in foreign currencies, may face the most exposure. But Chinese insurers said yesterday they saw little effect on operations as they derive the vast majority of their revenues domestically and collect almost all premiums in yuan. Li Liangwen, vice-president of Hong Kong and New York-listed China Life Insurance, said although the appreciation would have some negative effect on the yuan value of China Life's foreign currency assets, the overall effect would be 'negligible'.