Winners and Losers from China’s Yuan Devaluation

Chinese airlines

Chinese carriers have most of their debt in dollars. A weaker yuan will increase their costs to pay it off and hurt their earnings.

China Southern Airlines Ltd. declined 18 percent in Hong Kong trading, the most since 2001. China Eastern Airlines Ltd. slumped 16 percent, the steepest drop in seven years.

Each 1 percent drop in the yuan erodes 767 million yuan ($121 million) from China Southern’s annual profit, according to the carrier’s 2014 financial report.

European luxury-goods sellers

As the European Union’s major trading partner, China and its growing middle class has been a boon for the region’s luxury-goods makers. A weaker yuan makes it more expensive for Chinese consumers to buy German cars, Swiss watches and French handbags.

Shares of BMW AG, which received about 19 percent of its revenue from China in 2014, sank 4 percent in Germany. China also accounted for about 10 percent of Daimler AG’s sales.

LVMH Moet Hennessy Louis Vuitton SE slid 5.4 percent. Sales from Asian nations excluding Japan accounted for about 29 percent of the luxury-goods maker’s sales last year.

Commodity producers

The yuan’s decline increases the cost of imports, including commodities. Vale SA, the world’s biggest iron-ore producer, dropped 5.1 percent in Sao Paulo. China accounted for 37 percent of the Vale’s revenue in the second quarter.

China’s imports contributed to 35 percent of the Australian mining company BHP Billiton’s sales last year and accounted for 38 percent of the sales of Rio Tinto Plc.

Asian Currencies

All major Asian currencies fell on concern a weaker yuan will force other policy makers in the region to devalue their foreign-exchange rates as cheaper Chinese exports edge out competitors.

The Singapore dollar led the decline, falling 1.4 percent in the biggest selloff since 2011, while the South Korean won dropped the most since May 2013.

Chinese exporters

Local exporters in general benefit from a cheaper yuan. China Machinery Engineering Corp. rose as much as 5.9 percent in Hong Kong, while Lenovo Group Ltd. closed 2.9 percent higher. Each gets more than 65 percent of revenue from overseas.

Textile and clothing makers that sell to overseas markets are among companies that will benefit from the yuan’s depreciation, according to Delong Yang, an investment manager at China Southern Fund Management. Huafang Ltd., a Chinese textile manufacturer, surged 10 percent in Shanghai.

Li & Fung Ltd., a Hong Kong-based trading company which sells China-made goods from clothes and toys to U.S. and Europe, rose 5 percent in Hong Kong.

U.S. Stocks Fall, Apple Down 5.2%

U.S. stocks slid, following equities’ biggest gain since May, as China’s currency devaluation sparked concern across global markets that the world’s second-largest economy is headed for a deeper slowdown.

Companies that rely heavily on exports to China, including auto and luxury goods makers, retreated. General Motors Co. and Tiffany & Co. lost more than 2.1 percent. Apple Inc. sank 5.2 percent. Commodity producers from Freeport-McMoRan Inc. to Dow Chemical Co. fell at least 2.9 percent amid concerns about China’s growth. Google Inc. advanced 4.1 percent after saying it will reorganize into a holding company called Alphabet Inc.

Symantec Corp. decreased 6.9 percent to its lowest in more than a year after the security software maker agreed to sell its Veritas data-storage unit for $8 billion to Carlyle Group LP. Credit Suisse Holdings USA Inc. downgraded the shares to neutral from outperform, citing “destruction” of value from the tax liability on the deal relative to a previously proposed spinoff.

Banks Fall

Auto-parts makers Delphi Automotive Plc and BorgWarner Inc. declined more than 3.7 percent, tracking GM’s biggest slide in a month as China auto sales slumped to a 17-month low.

Banks in the S&P 500 had their worst day in a month as yields on U.S. 10-Year Treasuries dropped the most since July 6, and investors speculated that low interest rates will continue to hobble lenders’ earnings. Citigroup Inc. and Comerica Inc. fell more than 1.8 percent, while Bank of America Corp. slipped 1.4 percent.

Fed May Delay Interest Rate Hike

The Chicago Board Options Exchange Volatility Index climbed 12 percent Tuesday to 13.71. The gauge, known as the VIX, rose 10 percent last week after posting its biggest monthly drop since February.

The unexpected move by China’s policy makers bolstered speculation the Federal Reserve may have to delay raising rates, as the threat of a slowdown in China could harm global growth, while lower commodity prices damp inflation. The probability of a rate increase in September slipped to 44 percent from 54 percent Monday, according to futures trading data.