China stock market: who will be the winners and losers in the escalating US-China trade row
A sliding yuan may hurt airlines, developers and paper companies hard, but bodes well for exporters as it will boost their profitability
Worries over an intensifying US-China trade war have hit Chinese stocks and the currency, with analysts fearing a sliding yuan will hurt companies heavily exposed to US dollar debt.
However, the yuan’s decline is beneficial for export-reliant sectors such as Chinese textile manufacturers, whose shares were broadly higher on Tuesday, as a weakening currency is expected to boost their profits.
The yuan recovered on Tuesday after the People’s Bank of China posted a statement from the governor Yi Gang, which said that the recent fluctuation of the yuan was “mainly caused by a strengthening US dollar and external uncertainties”.
Still, the currency has weakened more than 3 per cent since mid-June, directly triggered by rising trade tensions between the US and China, said Morgan Stanley analysts led by Robin Xing, in a recent report.
Market sentiment has weakened amid concerns that the US tariff measures could put downward pressures on China’s growth and the yuan.
“Of all the recent concerns over Chinese companies and their US dollar bonds, a weaker renminbi further increases the pressure on weaker companies to service and repay their US dollar debt,” said Tai Hui, chief market strategist for Asia-Pacific at JPMorgan Asset Management.