Second China currency fall set to hit Apple, BMW and others hard

Makers of luxury goods are bracing themselves for another sharp fall in share prices as China devalued its currency for a second successive day. Tuesday’s devaluation saw sharp falls in the shares of European and US exporters to China with Apple (-5.2%), Burberry (-2.4%), BMW (-4.3%) and Louis Vuitton owner LVMH (-5.4%) all losing ground. China’s aspiring middle classes have been key customers to these luxury goods brands, and the devaluation will make them more expensive to Chinese consumers, thereby impacting the companies profitability. A second devaluation will send shockwaves across the world’s markets.

The new mechanism for determining the central parity of the Renminbi [yuan] announced by the PBC [People’s Bank of China] appears a welcome step as it should allow market forces to have a greater role in determining the exchange rate.

The International Monetary Fund

The People’s Bank of China insists there is no ground for sustained yuan depreciation, however a second consecutive daily devaluation would suggest otherwise. As previously reported, Chinese exports in July came in 8.3% lower than the prior year after fears that the strength of the yuan was rendering Chinese exports uncompetitive. A strong currency makes a country’s exports more expensive, which in turn reduces export volume therefore eroding any trade surplus.

China yuan Business