Could the Declining Yuan Hurt the Chinese Domain Market?
China's financial markets have continued to take a hit in recent weeks, as the Yuan experienced its sharpest decline in decades. This had a reciprocal effect on global stocks, as many investors feared that further devaluations from China could hurt profits.
But what does all this mean for the domain market – particularly Chinese buyers who have been aggressively buying domains over the last several years?
In a recent post, we analyzed the effect of China's falling stocks on the domain market. From the activity we've been seeing, we don't anticipate the stock market drop to have a major impact on domain prices, although the growth we’ve witnessed in recent years could decelerate a bit. Naturally, some investors will try to weather the storm on all fronts by pulling their money out of the markets altogether.
But what about the declining yuan?
Some are speculating that this could be another factor that contributes to a deceleration in the Chinese domain market. The folks at DomainGang.com explain that a falling Yuan "creates a cash flow issue to Chinese domain investors, many of which reaped the seeds of stock market trading in past months, and invested in domains, particularly numerics or pinyin letters." And while the market may continue to experience growth from Chinese organizations who see tremendous value in these short domains, some domainers who are actively looking to flip such domains may not pursue these investments as aggressively.
At 88 Domains, our view hasn't changed much, although we'll be continuing to watch the currency market to see what, if any, impact it has on the domain market. We're not seeing a sharp selloff of domains from Chinese investors, and domain pricing is still in-line with the numbers we've been seeing for a while now.
Of course, we probably haven't seen the last of the yuan's decline. And fresh concerns about China's currency manipulation could have a greater impact on many markets in the months ahead, so this is another story to keep an eye on.
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