At present, Asia is facing the overall economic slowdown. National currencies of Asian countries are weakening, and stock indices are sliding. China has a huge adverse impact on the region leaving imprints on other Asian economies. MSCI Asia Pacific tumbled by 1.6% to 137.85, China’s Shanghai Composite fell by 1.1%, Hong Kong’s Hang Seng is 2.4% down, and Japan’s Nikkei 225 dropped by 1.6%. As a result of the devaluation, the yuan has sunk by 2% and is currently trading near the mark of 6.4510 against the US dollar. “I’m annoyed I didn’t see it coming,” Benjamin Collett, Hong Kong-based head of Asian equities at Sunrise Brokers LLP said. “We’ve all been lamenting Japan’s success with its own currency, over-talking the middle-class consumption growth whilst Asian counterparts take Chinese production market share. China is taking back its market share, so that’s bad for Asia producers.” Still, despite concerns of outside observers, the Chinese authorities consider the situation to be quite normal and are sure that market participants will adapt to the changes soon. However, the yuan’s devaluation will reduce the attraction of shares of the Chinese companies, especially for foreign investors. “The attraction of holding renminbi-based assets including shares, bonds and everything else decreases when the currency depreciates,” Ronald Wan, chief executive at Partners Capital in Hong Kong, pointed out.
