Sunshine Global Circuits Co.Ltd(300739) : feasibility analysis report on adjusting foreign exchange derivatives trading business

Sunshine Global Circuits Co.Ltd(300739)

Feasibility analysis report on adjusting the business quota of foreign exchange derivatives

1、 Background of the company's foreign exchange derivatives trading business

Due to business development, Sunshine Global Circuits Co.Ltd(300739) (hereinafter referred to as "the company") and its subsidiaries have a large number of export businesses. Under the financial market environment of two-way fluctuation of RMB exchange rate, in order to effectively avoid foreign exchange market risks and prevent the adverse impact of large fluctuation of exchange rate on the company, the company and its subsidiaries plan to carry out foreign exchange derivatives trading business for the purpose of hedging.

2、 Overview of the company's adjusted foreign exchange derivatives business

The company's products have been mainly exported for many years. In the process of global business expansion, the company holds a certain amount of foreign exchange assets. In order to effectively avoid the risk of foreign exchange market and prevent the adverse impact of large exchange rate fluctuations on the company's performance, the company plans to adjust the trading quota of foreign exchange derivatives from RMB 600 million or equivalent foreign currency to RMB 130 million or equivalent foreign currency, The above quota is valid within 12 months after being approved by the general meeting of shareholders and can be recycled and rolled. If the duration of a single transaction exceeds the validity of the resolution, the validity of the resolution shall be automatically extended to the termination of the single transaction.

The foreign exchange derivatives transactions carried out by the company include forward settlement and sales of foreign exchange, foreign exchange swaps, foreign exchange options and other businesses for the purpose of locking in costs and avoiding and preventing exchange rate risks. The foreign exchange derivatives trading business carried out by the company is simple foreign exchange derivatives closely related to the basic business, and these foreign exchange derivatives are matched with the basic business in terms of variety, scale, direction and term, so as to comply with the company's legal, prudent and stable risk management principles.

3、 Necessity and feasibility of the company's adjustment of foreign exchange derivatives trading business line this time

With the further acceleration of the market-oriented reform of the exchange rate, the RMB has started two-way fluctuations. The import and export business of the company is mainly settled in US dollars, which is greatly affected by international political and economic uncertainties. At present, the foreign exchange market fluctuates frequently, and the uncertainty of the company's operation increases. In order to lock in costs and profits and prevent the risk of exchange rate fluctuations, it is necessary for the company to appropriately carry out foreign exchange derivatives transactions according to specific conditions.

The adjustment of foreign exchange derivatives trading business quota matches the company's business development. Based on the company's foreign exchange assets and foreign exchange revenue and expenditure business, in order to further improve the company's ability to deal with foreign exchange fluctuation risk, better avoid and prevent the risk of foreign exchange fluctuation faced by the company, and enhance the company's financial stability, it is necessary for the company to adjust the amount of foreign exchange derivatives trading business.

4、 Basic information of the company's adjustment of foreign exchange derivatives trading line this time

(i) Contract term: within 12 months from the deliberation and approval of the general meeting of shareholders.

(2) Trading partners: financial institutions approved by regulatory authorities and qualified for foreign exchange derivatives trading business.

(3) Business amount: the company and its subsidiaries carry out foreign exchange derivatives trading business within the limit of no more than RMB 1300000000 or equivalent foreign currency according to business needs. The above limit is effective within 12 months after being approved by the general meeting of shareholders and can be recycled and used. The transaction types include long-term settlement and sales of foreign exchange, foreign exchange swap, foreign exchange option and other businesses, such as the duration of a single transaction If the validity period of the resolution is exceeded, the validity period of the resolution shall be automatically extended to the termination of a single transaction.

(4) Liquidity arrangement: foreign exchange derivatives transactions are based on the company's foreign exchange assets and liabilities, and the transaction amount and transaction period match the expected period of foreign exchange revenue and expenditure.

(5) Other terms: foreign exchange derivatives transactions mainly use the company's margin or bank comprehensive credit line transactions, and the principal delivery or difference delivery is adopted at maturity.

5、 Risk analysis of the company's foreign exchange derivatives trading business

The company shall follow the principles of legality, prudence, safety and effectiveness in carrying out foreign exchange derivatives trading business, and shall not carry out speculative and simple arbitrage transactions. However, there are still the following risks in foreign exchange derivatives trading operations, including but not limited to: (I) market risk: the difference between the exchange rate of foreign exchange derivatives trading contract and the actual exchange rate on the maturity date will produce exchange gains and losses.

(2) Liquidity risk: foreign exchange derivatives are based on the company's foreign exchange assets and liabilities and match the actual foreign exchange revenue and expenditure to ensure that there are sufficient funds for clearing at the time of delivery, or choose net delivery of derivatives to reduce the cash flow demand on the maturity date.

(3) Performance risk: the counterparties of the company's foreign exchange derivatives transactions are banks with good credit and have established long-term business relations with the company, so the performance risk is low.

(4) Other risks: during the transaction, if the terms of the transaction contract are not clear, it may face legal risks.

6、 Risk control measures for the company's foreign exchange derivatives trading business

(i) The foreign exchange derivatives transactions carried out by the company are for the purpose of stabilizing the large fluctuation risk caused by exchange rate fluctuations on the profitability of export business, and any risk speculation is prohibited.

(2) The company has formulated the foreign exchange derivatives trading business 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, and strictly controls the trading risks.

(3) The Finance 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.

(4) The internal audit department of the company shall supervise and inspect the compliance of decision-making, management and execution of foreign exchange derivatives transactions.

7、 Conclusion of feasibility analysis of foreign exchange derivatives trading business 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 the risk of foreign exchange rate fluctuations, and for the needs of the company's stable operation. The company has formulated the management system for foreign exchange derivatives trading business, 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.

Sunshine Global Circuits Co.Ltd(300739) board of directors December 23, 2021

 

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