China’s economy has developed increasingly weak with a growth rate of China is said to be around the target 7 percent. Many observers also suspected that all figures from the country’s right. The last two days of devaluations is at 1.9 percent plus 1.6 percent.
A weaker currency makes it more expensive for a country to buy from other countries, while everything produced in the country will be cheaper expressed in other countries’ currencies. Now that China on top of other action allows its regulated currency weakens against the dollar, it is therefore a little cheaper to move jobs and factories to the country, while imports learn decrease.
The biggest losers are therefore the short term commodity companies. Price declines in the major base metals may become worse when it becomes more expensive for China to import. The Swedish mining company Boliden and Lundin Mining disadvantaged by weak metal prices. The corresponding effect we see for the oil company Lundin Petroleum, EnQuest and Tethys.
Other losers on the Chinese currency doping companies with relatively large sales to China. Such is the truck company Volvo, but also airbag company Autoliv affected. The same applies to industrial companies and Alfa Laval, Atlas Copco, Assa Abloy, Granges and SKF, the IT company Hexagon. Gains made in Chinese currency becomes worth less when the exchange rate deteriorates.
In the long term, however, there is a chance that the devaluations propel the Chinese economy. When starting companies selling goods to China instead benefit while commodity prices may turn up. Now that China’s economy is growing weaker than expected and the country devalued it may thus arise interesting locations for long-term investors who are shares in recoil.
We are on top of it in the seasonally often little weaker stock the months of August and September. It can put a further short-term pressure on shares in Swedish quality companies, which would be something of a nerve strong long-term investor to take advantage.
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