Europe’s luxury watchmakers have seen billions wiped from the value of their companies following the shock revaluation of China’s currency.
China’s central bank devalued the yuan by 1.9% on Tuesday, a move that will make Chinese exports cheaper on world markets, but imports more expensive.
The news hit seven months after the Swiss franc was allowed to appreciate in value against the euro and other currencies, which caused share prices of Swiss groups Swatch Group and Richemont to slump.
French giant LVMH was not hammered by January’s Swiss franc’s rise, but has seen its shares sold in the past 48 hours as investors digested the potential impact on Chinese sales following the yuan’s depreciation.
Shares in LVMH fell from 174.3 euros to 159.15 euros when news of the Chinese revaluation struck, but are still trading well above their January level of 125 euros.
Investors in Swatch Group shares have needed strong stomachs this year as currency markets have taken them on a rollercoaster ride. In early January Swatch shares were trading above CHF450, before plummeting to CHF355 when the Swiss franc rose. It had clawed its way back to CHF430 by the start of this week, only to fall back to CHF410 as the price of the yuan fell.
Richemont’s ride has been similar. It ended 2014 with a share price high of CHF91. This fell to CHF70 as the franc spiked. But by the end of last week, the Swiss group’s shares had recovered to CHF84 before the Chinese central bank’s decision hit and knocked its share price down to CHF77.3 today (Wednesday).