Xinjiang Zhongtai Chenical Co.Ltd(002092)
Feasibility analysis report on developing futures hedging business
1、 Purpose of commodity futures hedging business
In order to promote the steady development of the company’s business, avoid the adverse impact of commodity price fluctuations on production and operation, and resolve price risks, the company plans to carry out futures hedging business.
2、 How to carry out futures hedging
1. Futures varieties: the varieties of futures hedging business carried out by the company are related products and raw materials for production and operation and industrial chain operation of the company.
2. Scale and source of invested funds: when the company carries out futures hedging business, the maximum amount of margin occupied shall not exceed 5% of the owner’s equity of the parent company in the latest audit. Within the validity period of the above amount and resolution, it can be recycled and used. The source of funds is the company’s own funds, not involving raised funds.
3. Implementation subject: according to the business implementation, the implementation subject is the company and its subsidiaries. Without the consent of the company, its subsidiaries shall not carry out futures business.
4. Term of validity: the term of validity shall be valid within one year from the date of deliberation and approval by the board of directors.
3、 Feasibility analysis of futures hedging business
The company has formulated the management measures for internal control of Xinjiang Zhongtai Chenical Co.Ltd(002092) futures hedging business as the internal control and risk management system for futures hedging business, which clearly stipulates the amount of margin used in hedging business, the variety and scope of hedging business, the approval authority, the responsible department and person, the internal risk reporting system and risk handling procedures, It can effectively ensure the smooth progress of futures business and effectively control risks. The targeted risk control measures taken by the company are feasible, and it is feasible to carry out futures hedging business.
The company has set up a reasonable hedging business organization, defined the responsibilities and authorities, approval authorities and authorization scope of relevant departments and posts, avoided ultra vires disposal, and ensured the independence of personnel in each post and the effectiveness of internal supervision and management mechanism to the greatest extent.
4、 Risk analysis of futures hedging business
The company’s futures hedging business is mainly to avoid the impact of commodity price fluctuations on the company, but there will also be certain risks:
1. Market risk: it will be affected by many factors such as international and Chinese economic policies and economic situation, exchange rate and interest rate fluctuations, such as large changes in raw material and product prices, exchange rate and interest rate, which may cause futures trading losses.
2. If the transaction price is too low, the actual risk of the position cannot be traded, resulting in the deviation between the transaction design and the actual risk of the hedging plan. 3. Operational risk: hedging is highly professional and complex, and there are risks caused by improper operation or operation failure.
4. Technical risk: due to uncontrollable and unpredictable system failure, network failure and communication failure, the trading system operates abnormally, resulting in trading instruction delay, interruption or data error.
5. Capital risk: when the company fails to make up the margin in time, it may be forced to close its position and suffer losses.
5、 Risk control measures of futures hedging business
1. Clarify the trading principles of hedging business: hedging business transactions take hedging as the principle and eliminate speculative transactions. Match the hedging business with the company’s production and operation, and adjust the operation strategy in time to improve the hedging effect.
2. Strictly control the capital scale of hedging business, reasonably plan and use the margin within the amount and period approved by the board of directors of the company. The company will reasonably allocate its own funds for hedging business, and will not use the raised funds for hedging directly or indirectly.
3. The company has established the management measures for internal control of Xinjiang Zhongtai Chenical Co.Ltd(002092) futures hedging business to clarify the organizational structure and responsibilities, business authorization process and operation process, risk management and other contents of hedging business, which can effectively standardize futures hedging transactions and control trading risks.
4. The company continuously strengthens the professional ethics education and business training of relevant staff to improve their comprehensive quality. Strengthen the grasp and understanding of the policies of the state and relevant regulatory institutions, and timely and reasonably adjust the hedging ideas and schemes.
6、 Conclusion
Through the analysis of the company’s industry, combined with the company’s own business conditions and the economic situation in China and abroad, and referring to the experience and practices of relevant large enterprises in China, the company’s futures hedging business within the scope of relevant approval can effectively avoid the risk of commodity price fluctuation, resolve the price risk and stabilize the product profit level, Improve the company’s sustainable profitability and comprehensive competitiveness.
To sum up, the company’s futures hedging business can avoid the risk of commodity price fluctuation to a certain extent, prevent the adverse impact of sharp commodity price fluctuation on the company, improve the use efficiency of working capital and enhance financial stability.
Xinjiang Zhongtai Chenical Co.Ltd(002092) board of directors February 17, 2002
