Exchange Rate, iPhone, Tungsten Carbide Cutter and Listed Company-1

Turkish lira crisis fueled by Trump

Last weekend, Donald Trump struck a vengeful note, announcing, “I have just authorized a doubling of Tariffs on Steel and Aluminum with respect to Turkey as their currency, the Turkish Lira, slides rapidly downward against our very strong our very strong Dollar!”

 Turkey was thrust into a full-blown currency crisis. As a result, the Turkish currency shed about 20% of its value in a single day. The cumulative decline in the past four months reached nearly 40%. At the same time, inflation in Turkey also hit a new record high in the past 15 years.

Turkey is the member of NATO and has actively sought to join the European Union in recent years. Some European countries have a close connection with Turkey in the economy and finance. President Recep Tayyip Erdogan strongly opposes the capital control and refuses to seek for IMF’s help. The analyst of JP Morgan has warned that there are few options for Turkey, and raising interest rates to prevent lira's devaluation will not work effectively in the future. Moreover, the increase of interest rate imposes great pressure on the bank. Therefore, the analyst believes that Turkey is unable to stop the decline of lira for some time.

Panic spreading through Europe

The plunge of Turkish currency comes with the devaluation of the euro, the pound and other major currencies against dollar. The dollar index has broken through the consolidation over the past few days and reached more than 96. It stays above 96 since Monday's opening. Some traders pessimistically believe that with the devaluation of emerging market currencies such as the South African Rand and the Russian ruble this year, the decline has intensified, and the recovery in Europe has been weak. As public panic has been intensified, the Fed is expected to raise interest rates. In the event of extreme situation in the future, the next key point of the dollar index will be 97, or even 100. 

Turkey-China Trade

China is Turkey's largest exporter and the 15th largest import country. There are a lot of trade corporations between Turkey and China. The volume of trade between two countries from January to March in 2018 has reached 6.75 billion dollars. Under that circumstance, though Turkey does not limit its bilateral trade with China in terms of policy, the import volume will reduce sharply owing to the decrease of the purchasing power caused by the currency devaluation. Therefore, it has great implications on our export industries and products to Turkey.

To take Chiantungsten Online as an example, though we do not have so many real-time online transactions with Turkish customers because of Turkey's special business environment and currency management system, we still have a large amount of offline trade with Turkish customers. It includes the tungsten powder, tungsten carbide powder, tungsten carbide cutting tools and the tungsten alloy. Turkey has a strong demand for high specific gravity tungsten alloy. At present, it seems that our customers' future purchasing power will be greatly limited. 

Fortunately, we have some customers who have already exchanged lire for dollars in a large amount in order to pay for the tungsten carbide products in advance. We believe that the customers will make a fortune when our goods arrive in Turkey.

Besides the individual cases, what are the implications on the RMB future tendency and the industries of tungsten, molybdenum and rare earth?

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