Renminbi depreciation approaching the "7" pass, textile and apparel enterprises frankly say that the short-term is good

According to the latest data from China Foreign Exchange Trading Center, the mid-price of the RMB exchange rate against the US dollar was 6.8904 on November 23, down 125 basis points from the previous trading day. Experts say the short-term rebound in the renminbi exchange rate is expected to be limited.

Industry insiders have analyzed that the spot exchange rate of RMB against US dollar has fallen sharply, and textile and garment listed companies with US dollar settlement as the main and large proportion of export business are expected to usher in a favorable stage.

Renminbi depreciation benefits textile industry

Guangfa Securities issued a research report, saying: "The devaluation of the RMB is conducive to enhancing the competitiveness of enterprises'export products, enabling enterprises to get more orders, and driving the growth of exports." Guangfa Securities believes that, to a certain extent, it can help to delay the order outflow caused by the rising production costs of domestic labor and environment in recent years, and the growth rate of export amount continues to slow down, even a negative growth trend.

Influenced by the appreciation of RMB and the rising cost of labor and raw materials, the competitiveness of China's textile and apparel industry in the world's major markets has been weakened in recent years, and the export volume of textile and apparel has declined year on year.

In the first three quarters of 2016, the U.S. economy gradually recovered, but the market remained depressed. According to the latest statistics of the General Administration of Customs, in October 2016, China's textile and apparel exports were 21.46 billion US dollars, down 5.73% annually and 9.28% year-on-year. Among them, exports of textiles (including textile yarns, fabrics and products) amounted to $8.598 billion, down 6.64% from the same period last year, while exports of clothing (including clothing and accessories) amounted to $12.862 billion, down 10.96% from the same period last year.

From January to October 2016, China's textile and apparel exports totaled 22.261 billion US dollars, down 5.31% year-on-year. Among them, textile exports totaled 88.132 billion US dollars, down 3.25% year-on-year; and apparel exports totaled 134.429 billion US dollars, down 6.62% year-on-year.

Although the market demand in developed overseas markets, especially in Europe, is difficult to improve in the near future, the industry insiders believe that the profit margin of textile and apparel industry will rise by 2% to 6% for every 1% devaluation of the RMB against the US dollar. Moreover, China's textile and apparel industry ranks first in the world in scale, and exchange rate changes have a great impact on the industry.

Some insiders pointed out that the textile and apparel industry is highly dependent on exports. On the one hand, the depreciation of RMB will help companies reduce costs and improve product competitiveness. On the other hand, enterprises will get more orders. On the other hand, it will help export-oriented enterprises to obtain exchange earnings. The devaluation of the RMB means that the purchasing power of foreign currencies will be enhanced, which will further stimulate consumption and benefit the export of textile products.

A person from an export-oriented textile listed company said that during the devaluation of the RMB, the textile industry is indeed good, but this is only a short-term impact. In the long run, we need to wait and see.

"Because the company is facing small crowds, so they are receiving individual bills, usually signed once a half year. Therefore, the devaluation of the RMB will benefit the company in the short term, but whether it is good in the long run depends on the later trend." Those listed companies in the textile industry told the Securities Daily that if the RMB depreciates in the long run, it will be good in the long run, but if it is only in the short run, the impact on the company's performance is not obvious.

Some analysts pointed out that, because the orders of overseas customers are placed ahead of schedule, and the letter of credit issued by customers is usually 30 or 90 days to settle foreign exchange, the fluctuation of short-term exchange rate will not change significantly for the increase of export enterprises'income. The key is to pay attention to the next exchange rate changes. If the exchange rate changes continue, orders and The quotation will be affected. From the standpoint of exchange rate preservation, export enterprises should choose to carry out forward settlement and sale of foreign exchange or RMB options in banks to avoid potential risks caused by exchange rate fluctuations.

Other analysts suggest that enterprises importing raw materials from Europe and the United States can delay purchasing from foreign suppliers and make sure of the exchange rate; or ask for deferred payment, if they can consult with exporters and allow deferred delivery date, it is equivalent to deferred payment.

Looking forward to the future reflection of the international market

It is generally believed that the devaluation of RMB will benefit leading textile and apparel companies, which account for a relatively high proportion of export business, especially in US dollars. On the one hand, it will help companies increase their orders, on the other hand, most companies settle in US dollars. Under the devaluation of RMB, they can also obtain certain exchange gains.

However, some listed companies said that although the downward exchange rate changes have a clear positive impact on the industry, most enterprises have taken a series of measures to hedge exchange rate risks, such as import hedging, dollar financing and forward foreign exchange transactions, and the positive impact on corporate performance should be analyzed in detail.

Another listed textile and apparel company, mainly exporting, said that although the depreciation of the RMB is good for textile and apparel export enterprises, because the RMB is related to the international market, we need to look at the reflection of the international market in the future.

At present, there are two opinions about the future trend of the RMB. One is that the RMB will not continue to depreciate in the long run; the other is that the RMB will continue to depreciate.

Statistics show that from November 4 to November 21, the intermediate value of the RMB against the US dollar experienced 12 consecutive falls, with a total devaluation of 1494 basis points, a devaluation of 2.21%. Although there was a short rebound on November 22, it fell again on November 23. Some experts believe that in the short run, there is still pressure for RMB to depreciate against the US dollar, but in the long run, there is still pressure for RMB to depreciate against the US dollar.