RMB appreciated by 6.3% vs USD ytd; Buy Samsonite, Lifestyle and Sa Sa    We have reviewed the sensitivity test conducted by the HK/Internationalcompanies under our coverage and have spoken to some of the managementteams. Should RMB appreciation persist, we believe that, from 2H17,companies like Samsonite/CTF should benefit, as ~8%/50% of their respectivesales come from China. CTF is also likely to benefit from recent gold price rallyas hedging ratio moved from 70% in the past to an average of 40%. OnSamsonite, although around 70-75% of its COGS comes from China, around20% of this is RMB-based labor cost, thus the translation benefit from theChina market is able to offset such a cost.    A stronger RMB vs USD might also encourage more PRC consumers to travelto USD linked markets (including HK) and shop during the upcoming OctoberGolden Week, although it is true that travel spending on shopping is no longera priority (“2017China outbound tourism report” by hotels.com).For reference, players in HK like Lifestyle, Sa Sa and CTF generate~40%/~70%/~45% of sales in HK from mainland tourists. In addition, someKorean cosmetics brands are restricting purchases of products at DFS storesto avoid excessive ‘Diagou’..    On the other hand, Giordano might face a headwind, as ~80% of its COGScomes from China. For 2017, it targets a 1ppt improvement in GPM from2016’s 59.38%. For 1H17, GPM achieved a 0.2ppt improvement yoy. Shouldsuch a trend persist, we believe that there is a potential downside risk to ourGPM forecast for 2017, as we estimate a 0.83ppt increase. Management isseeking alternatives for hedging such headwind.    But RMB depreciated by 6.7% ytd vs Euro    This will impact l’Occitane’s margin as 80% of its COGS is Euro based whilesales from China accounted for 10% of its sales. Based on our latest update,the whole currency movement (including other currencies means an -2%impact for 1HFY18and -4% for FY18if the trend maintains).

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