Companies that sell goods to China ranging from iron ore to luxury handbags are poised to benefit from Beijing's move to revalue its yuan currency, while exporters will suffer as their products become more expensive.
On Thursday, China said it would scrap the yuan's peg to the U.S. dollar and tie it to a basket of currencies, revaluing the yuan by 2.1 percent to 8.11 to the dollar.
Expectations for the move had ranged from 1 to 10 percent, with many market watchers betting on a move at the lower end.
Stocks seen benefiting from a firmer yuan include property shares such Hong Kong real-estate and logistics firm Kerry Properties, which has substantial property assets in China, and rival Hang Lung Properties.
"Export-oriented sectors will lose out, but importers are seen gaining because their costs of imports will go down, because they are paid in U.S. dollars. Also, manufacturers will gain in the same way," said Dale Tsang, managing director at GC Capital (Asia) Ltd. in Hong Kong.
Ben Kwong, associate director of KGI Asia Ltd., said he expects stocks in Hong Kong to trade within a narrow range of roughly 200 points on Friday.
"The extent of the change was less than expected," he said, adding that other factors such as the upcoming results season and interest-rate moves had been driving the market.
Resources to retail
Global miners that supply China's voracious appetite for resources, such as Rio Tinto, BHP Billiton and Companhia Vale do Rio Doce are expected to be beneficiaries of the revaluation of the yuan, also known as the renminbi.
Luxury goods makers including LVMH, Tiffany & Co. Inc. and Coach Inc. are also expected to gain as brand-conscious Chinese customers have increased spending power.
"China property stocks will gain because they can be seen as asset plays of the RMB (renminbi). China airlines will gain as they have a lot of foreign liabilities," said Agnes Deng, fund manager at Standard Life Investments.
"China telecoms will gain because they can be seen as proxies," she added.
But Chinese exporters, such as Yue Yuen Industrial, the world's biggest maker of athletic shoes, are expected to the feel the pinch as their goods become more expensive.
"(Chinese) commodity stocks will be weakened, because they will have weaker U.S. dollar-denominated products but higher production costs (in) renminbi," Deng said.
With other Asian currencies on the rise as a result of China's move, companies that source goods in the region, such as Next Plc. and Wal-Mart Stores Inc. are set to feel the pinch of more expensive goods.
"China exporters will be negatively affected as their costs will be higher, and competition will be greater than before," said Conita Hung, director at Delta Asia Financial Group.
Other stocks with large exposure to Asia and China and seen positively affected by appreciating Asian currencies include restaurant firms Yum Brands Inc., McDonald's Corp., and financial companies HSBC and Standard Chartered.