Feasibility analysis report on foreign exchange derivatives trading
1、 Background of the company's foreign exchange derivatives trading
In the daily operation of the company and its subsidiaries, some products need to be exported to overseas markets, while some raw materials and equipment need to be imported from overseas markets. Under the influence of international political, economic and other uncertain factors, the foreign exchange market risk has increased significantly. In order to further improve the company's ability to deal with the fluctuation risk of the foreign exchange market, better avoid and prevent the fluctuation risk of foreign exchange rate and interest rate, and enhance the company's financial stability, the company will carry out foreign exchange derivatives transactions and strengthen the company's foreign exchange risk management, Effectively reduce the negative impact of foreign exchange market fluctuations on the company's operation. 2、 Overview of foreign exchange derivatives transactions carried out by the company
1. Transaction purpose
In order to avoid foreign exchange market risks, reduce the impact of exchange rate and interest rate fluctuations on the company's performance and improve the use efficiency of foreign exchange funds, we can reasonably reduce financial expenses, increase exchange gains and lock in exchange costs.
2. Limit and term
The company and its subsidiaries (including subsidiaries at all levels included in the company's consolidated statements) plan to carry out foreign exchange derivatives trading business of no more than RMB 200 million (or equivalent foreign currency), and the service life shall not exceed 12 months from the date of deliberation and approval by the general meeting of shareholders. Within the above quota, it can be used circularly.
3. Transaction business type
The types of foreign exchange derivatives business to be carried out by the company include but are not limited to forward settlement and sales of foreign exchange, foreign exchange options, foreign exchange swaps, interest rate swaps or combinations of the above products and other foreign exchange derivatives business. The basic objects of derivatives include exchange rate, interest rate, currency, commodity and other objects.
4. Counterparty
The counterparty of the company's foreign exchange derivatives trading business is a financial institution approved by the regulatory authority and qualified for foreign exchange derivatives trading business, and there is no affiliated relationship.
3、 Necessity and feasibility of the company's foreign exchange derivatives trading
In the daily operation of the company and its subsidiaries, some products need to be exported to overseas markets, while some raw materials and equipment need to be imported from overseas markets. Under the influence of international political, economic and other uncertain factors, the risk of foreign exchange market has increased significantly. In order to further improve the company's ability to deal with the fluctuation risk of foreign exchange market, better avoid and prevent the fluctuation risk of foreign exchange rate and interest rate, and enhance the company's financial stability, it is necessary for the company to appropriately carry out foreign exchange derivatives trading according to specific conditions.
The foreign exchange derivatives transactions carried out by the company are closely related to the company's business. Based on the foreign currency collection forecast under export and foreign currency payment forecast under import, or the foreign currency bank deposits and borrowings derived on this basis, the company must have its own funds matching the foreign exchange transactions and foreign exchange derivatives business, The raised funds shall not be used to conduct foreign exchange transactions and foreign exchange derivatives business transactions directly or indirectly, and the scale of funds shall be controlled in strict accordance with the transaction amount reviewed and approved, so as to further improve the company's ability to deal with foreign exchange fluctuation risks, better avoid and prevent foreign exchange rate and interest rate market fluctuation risks, and enhance the company's financial stability.
4、 Risk analysis of the company's foreign exchange derivatives trading
The company follows the principles of legality, prudence, safety and effectiveness in carrying out foreign exchange derivatives trading, and does not engage in speculative and arbitrage trading operations, but there are still certain risks in foreign exchange derivatives trading operations:
1. Market risk: due to large changes in the foreign exchange market, there may be market risk of loss due to changes in the price of foreign exchange derivatives caused by market price fluctuations such as the underlying interest rate and exchange rate;
2. Internal control risk: foreign exchange derivatives trading is highly professional and has high internal control risk, which may be caused by imperfect internal control system.
3. Payment collection forecast risk: the business department makes payment and payment collection forecast according to purchase orders, customer orders and expected orders, but in the actual implementation process, suppliers or customers may adjust their own orders and forecasts, resulting in inaccurate payment collection forecast of the company, resulting in the risk of delayed delivery of foreign exchange derivatives.
4. Legal risk: due to the change of relevant laws or the violation of relevant legal systems by counterparties, the contract may not be executed normally and bring losses to the company.
5、 Risk control measures taken by the company for foreign exchange derivatives transactions
1. The foreign exchange derivatives transactions carried out by the company are aimed at locking in costs, avoiding and preventing exchange rate and interest rate risks, and risk speculation is prohibited.
2. The company has formulated the foreign exchange derivatives trading management system, which clearly stipulates the operation principles, approval authority, internal operation process, information isolation measures, internal risk control procedures and information disclosure of foreign exchange derivatives trading to control transaction risks.
3. The company will carefully review the contract terms signed with financial institutions and strictly implement the risk management system to prevent legal risks.
4. The investment and Financing Department of the company will continue to track the changes in the open market price or fair value of foreign exchange derivatives, timely evaluate the changes in the risk exposure of foreign exchange derivatives transactions, regularly report to the management of the company, timely report any abnormalities, prompt the risk and implement emergency measures.
5. The compliance of decision-making, management and execution of foreign exchange derivatives trading shall be daily supervised by the audit and supervision department of the company.
6、 Feasibility analysis conclusion of foreign exchange derivatives transactions carried out by the company
The company's foreign exchange derivatives transactions are carried out around the company's actual foreign exchange revenue and expenditure business, based on specific business operations, for the purpose of avoiding and preventing exchange rate risk and interest rate risk, and for the needs of the company's stable operation. The company has formulated the foreign exchange derivatives trading management system, and the targeted risk management and control measures planned by the company are also feasible. By carrying out foreign exchange derivatives transactions, the company can avoid and prevent the risk of exchange rate fluctuations to a certain extent.
June 25, 2022
