The benefit of competitive devaluations is negligible. Especially considering that the 3 largest Economies of Asia-China, Japan and South Korea are essentially export led and all are targeting the same consumer. So first the Yen fell by 40 per cent against the USD, and now the Chinese Yuan is down 4 per cent. It is diificult to envisage that a 4 per cent devaluation can replace consumers who got a 40 per cent discount from Japan. And India with a 1.5 per cent devaluation is further behind to make any gains.
Infact on the flip side, all devaluations lead to imports getting curtailed and domestic products getting replaced where-ever possible with cheaper subsititutes. At the same all economies import some form of semi-finished products as raw material inputs. While input costs rise, the export realisations are not enough. Finally, with the exception of Korea and Japan, no country has amassed a debt of USD 35 trillion as has been done by China. A devaluation suddenly increases the debt in domestic currency. An implosion will follow. So more than any other major economy, China has been, and will continue to be, adversely impacted by the BOJ’s policy of competitively devaluing the yen and these reducing China’s competitiveness. This sort of revaluation of the RMB is the last thing that China needs given its stagnant manufacturing sector and its overburdened banking sector. Given that it has been backed into a corner, it is hard to see what else the Communist Party can do other than to embark upon a program to devalue the RMB. Such a step is likely to send shockwaves around the world because it will be a clear acknowledgement that the Chinese economy is far weaker than the 7% GDP growth headline figure. Indian equities are likely to get dragged down by this shockwave, perhaps by as much as 10%.” Now that the Chinese central bank has begun what would appear to be a program of devaluing the currency under the garb of letting it float within a wider band. We reiterate the point we made on 5th November 2014, namely, that the Indian stockmarket stands exposed as our products (eg. steel, aluminium, chemicals, auto ancillaries, 2Ws, etc) start losing competitiveness to their Chinese counterparts. When the Chinese devalued their currency in the mid-1990s to trigger the South East Asian crisis, India was a reasonably insulated economy with low levels of foreign currency debt. Now the roles have been reversed – the South East Asian countries have throttled back on foreign currency debt whilst we have loaded up on the same. India’s foreign currency debt as of March 2015 stands at US$475bn. -- Kindly email stock reports at STOCKRESEARCHER@googlegroups.com For sharing knowledge -- NIFTYVIEWS.COM NOW A FREE OPEN SOURCE WEBSITE. http://www.niftyviews.com/ Disclaimer :- "The opinions expressed by the members on this board are based on their individual experience and perceptions and to share information with other members with the best of intentions to help fellow members in investment decisions as equity investment is a risky venture.The administrator of www.Niftyviews.com just provide a platform for the authors to express their opinion and take no guarantee for the genuineness of the same."ANY member of this forum doesnt prepare or publish any research report; or ii. provide research report; or iii. make 'buy/sell/hold' recommendation; or iv. give price target; --- You received this message because you are subscribed to the Google Groups "Niftyviews.com" group. To unsubscribe from this group and stop receiving emails from it, send an email to stockresearcher+unsubscr...@googlegroups.com. For more options, visit https://groups.google.com/d/optout.
