- Title: CHINA-MARKETS/YUAN-WEALTH Luxury retailers may suffer as yuan slumps
- Date: 13th August 2015
- Summary: HONG KONG, CHINA (FILE) (REUTERS) HONG KONG PROPERTY HONG KONG ESTATE AGENT VARIOUS OF HONG KONG REAL ESTATE ADVERTS IN WINDOW HONG KONG SKYLINE WITH BOAT ON WATER
- Embargoed: 28th August 2015 13:00
- Location: China
- Country: China
- Topics: General
- Reuters ID: LVAA5F5AR509UPRBZJ9Z3NZ4LHON
- Aspect Ratio: 16:9
- Story Text: Luxury fashion retailers around the world could suffer after China devalued its currency on Tuesday (August 11).
More than 100 million Chinese people travel abroad every year, buying more luxury goods than any other nation.
Shopping for the perfumes and designer clothes that can cost them twice as much at home is a major travel incentive.
But with the currency's depreciation, leading regional currencies also lower, Hong Kong, pegged to the U.S dollar, has become expensive.
On Canton Road, lined with designer stores, mainland Chinese tourists queued up outside Chanel, Luis Vuitton and Hermes which operate a strict quota system to fend off the usually voracious shoppers.
But on Thursday (August 13), some, including mainland tourist Hung-Chun Cai, said they were watching their pennies a little more closely.
"The exchange rate of the yuan to the Hong Kong dollar of course isn't as favourable as before. I definitely don't feel I can purchase as much but I think it's still acceptable," he said outside Prada.
Meanwhile, for another mainland tourist, Anna Sun, the benefits of Hong Kong's proximity outweighed a small slide in the yuan's value.
"Hong Kong after all is so close to the mainland. It's convenient to come. I bring my kids here. To me it doesn't really affect me much," Sun said.
China's central bank on Thursday has knocked around 3.2 percent off the value since Monday's (August 10) close.
BNP Paribas Asian Equity Strategist, Manishi Raychaudhuri thinks the move could herald a longer-term slide in the exchange rate.
"Competing currencies like Korean won or Taiwanese dollar have depreciated as much, if not more than, compared to the Chinese RMB. And therefore those goods have not really become costlier from the mainland Chinese perspective. But the Hong Kong goods, luxury retail, Hong Kong property, they have become costlier over the last few days. So I think these countries which have a pegged currency and have therefore appreciated relative to the Chinese RMB, do have something to worry about in the medium term," he said.
The downward move was the biggest since a massive devaluation in 1994, and appeared to reverse a previous strong yuan policy.
Investors were quick to bet companies such as Louis Vuitton holding company LVMH, Gucci owner Kering and L'Oréal could suffer.
The stocks were among the biggest fallers on the Paris stock market after the announcement, dropping between 1.5 and 4 per cent.
Though they have recovered some losses, they were not trading at their previous levels on Thursday.
Analysts believe Chinese luxury spending accounts for as much as 45 per cent of the global market - up from effectively zero a decade ago.
The World Tourism Organisation said China was the biggest "outbound" tourism spending country in 2014, with $165 billion U.S. dollars laid out - up 28 per cent from 2013. As recently as 1995, the Chinese spend was only $3.7 billion U.S. dollars.
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