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Appreciation of yuan would benefit steel, IT

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‘The Chinese government has set a plan to boost domestic consumption this year.’
March 10, 2010
With expectations rising that China will let its currency appreciate sooner rather than later, investors are keeping a close eye on local stocks that could benefit from such a move.

Local industries competing aggressively with China in the overseas export market will receive the biggest boost from the yuan’s appreciation, Meritz Securities said yesterday. A stronger yuan would make products manufactured in China more expensive in the global market, benefiting Korean exporters. Based on 2009 data, companies in the electronic devices, machinery and steel industries have a large overlap in the export market with their peers in China.

Meritz Securities said any appreciation of the yuan will benefit steel-related stocks such as Posco and Hyundai Steel Co.

The IT and auto sectors, which are considered closely related to Chinese consumption, should see some positive impact as well.

“The Chinese government has set a plan to boost domestic consumption this year,” said Seo Yong-hee, an analyst with Meritz Securities. “Korean firms engaged in the IT and auto sectors, in particular, will see gains when the Chinese domestic market grows.”

Woori Investment Securities also forecast a boost in the IT and auto sectors if and when the yuan appreciates, recommending that investors pay particularly close attention to Samsung Electronics and Hyundai Motor. Additionally, local securities firms expect companies that produce chemicals, optical instruments and ships to benefit, among others.

China’s currency has been fixed at 6.82 yuan to the dollar since July 2008, a measure the country adopted to cope with the global economic crisis.

By Jung Jae-yoon []

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