Lun Ni event, so that hedging has become the focus of attention from all walks of life. In the A-share market, how many listed companies have participated in hedging?
According to the information statistics of Shanghai Securities News, since 2000, 938 listed companies have issued hedging related announcements, of which 331 are mainly involved in foreign exchange hedging and 607 are involved in commodity futures hedging (some of them are also involved in foreign exchange hedging).
How large is the hedging scale of listed companies? According to incomplete statistics, the total amount of margin disclosed by 938 companies exceeded 600 billion yuan. Among them, the margin of some companies is as high as 10 billion yuan (such as Contemporary Amperex Technology Co.Limited(300750) ), and the margin of some companies is between 10 million yuan and 20 million yuan. Some companies did not disclose the specific hedging limit, but gave the quantity limit for specific products. For example, the total scale of Baoshan Iron & Steel Co.Ltd(600019) exceeded 100 billion yuan.
“In recent years, more and more listed companies hedge the risk of price fluctuations through the futures market.” According to the relevant person in charge of a futures company in Central China, with the development of China’s futures market, the breadth and depth of leading enterprises’ participation in hedging have been continuously increasing. The futures market has played an important role in helping entity enterprises effectively avoid risks, improve corporate governance and enhance market competitiveness.
hedging gradually becoming standard configuration of faucet
Price discovery and risk hedging are the two main functions of the futures market. Duan Lei, researcher of Hehe futures industry finance department, introduced that with the help of the futures market, enterprises can not only obtain the supply and demand information of the future market and improve the scientific rationality of enterprise production and operation decisions, but also avoid market price risks through hedging and truly achieve sustainable and stable operation.
In February this year, a manufacturing listed company announced that it planned to invest no more than 50 million yuan in hedging business. ” Contemporary Amperex Technology Co.Limited(300750) is hedging. The chairman thinks we should do the same. Let’s try it on a small scale first. The price of materials rose by almost 50% last year, which has greatly affected the company’s profits and needs hedging.” The company’s secretary told reporters.
Contemporary Amperex Technology Co.Limited(300750) has participated in hedging for many years, and the scale is expanding rapidly. In 2019, Contemporary Amperex Technology Co.Limited(300750) disclosed that it planned to hedge copper, aluminum, nickel and other metal raw materials, with a deposit of no more than 1.3 billion yuan; At the same time, foreign exchange shall be hedged, and the margin shall not exceed 800 million yuan. In 2020, the hedging amount of the company’s commodities and foreign exchange will not exceed 6 billion yuan; In 2021, the amount of commodity hedging will be further increased to no more than 10 billion yuan, and the amount of foreign exchange hedging will be 6 billion yuan. In the power battery industry, Sunwoda Electronic Co.Ltd(300207) also took out 8 billion yuan (upper limit) to carry out foreign exchange hedging.
For some traditional giants, hedging has long become an important part of their operation. For example Jiangxi Copper Company Limited(600362) , the company disclosed in 2008 that the futures position held by the company is based on the actual needs of the company’s production and operation Jiangxi Copper Company Limited(600362) 2020 annual report shows that the company holds a variety of hedging instruments such as forward foreign exchange contracts, interest rate swap contracts, commodity option contracts and commodity futures contracts.
Another example is Baoshan Iron & Steel Co.Ltd(600019) , the company recently disclosed its plan to carry out financial derivatives business in 2022, in which the maximum amount of commodity hedging is 8 million tons of iron ore, 2.2 million tons of hot rolling, 220000 tons of fuel oil, 3000 tons of nickel, 100000 tons of coke and 1.3 million tons of coking coal. The company also plans to carry out multi currency cross forward conversion of no more than US $12.16 billion, interest rate swap conversion of no more than US $3.42 billion, and structured financial products linked to financial derivatives of no more than US $410 million.
Airlines such as Air China Limited(601111) , China Southern Airlines Company Limited(600029) , China Eastern Airlines, China Express Airlines Co.Ltd(002928) etc. hedge aviation fuel, foreign exchange and interest rate all year round in order to control costs. Vanke, a real estate leader, also participates in hedging, mainly through foreign exchange transactions carried out by its subsidiaries. Hengyi Petrochemical Co.Ltd(000703) recently disclosed that the hedging amount this year is no more than 1.6 billion yuan Hengli Petrochemical Co.Ltd(600346) also announced that in order to avoid the impact of sharp fluctuations in crude oil and product prices on the company, hedging transactions are expected to be carried out within the amount of 3.3 billion yuan.
With the listing of some new futures varieties, leading companies in various industries also have effective hedging tools. “Jujube first share” Haoxiangni Health Food Co.Ltd(002582) began to participate in the trading of jujube futures in 2019. After the launch of pig futures, Muyuan Foods Co.Ltd(002714) , Henan Shuanghui Investment & Development Co.Ltd(000895) and other industrial chain companies have also started commodity hedging business, with investment amounts of 800 million yuan and 200 million yuan respectively.
According to statistics, there are 94 futures and option products in China’s futures market, basically covering Shenzhen Agricultural Products Group Co.Ltd(000061) , metals, energy, chemical industry, finance and other major fields of the national economy. In contrast, at the end of 2011, there were only 27 futures varieties in China, while 67 new futures varieties have been listed in the past 10 years, significantly improving the ability to serve the real economy.
speculative events happen occasionally
With more and more listed companies participating in hedging transactions, various “accidents” also appear one after another. “This is very normal. It’s like driving. When there are few cars on the road, there are few accidents, there are many cars, and all kinds of problems will come.” The business head of a futures company in Shanghai said.
Due to the generosity of “Zhejiang good father-in-law”, the “hedging accident” of Jinzi Ham Co.Ltd(002515) has been widely spread. In brief, at the end of August 2021, the company successively bought pig bullish contracts, and the warehouse building cost ranged from 17000 yuan to 15000 yuan per ton. From mid September 2021, the price of pig futures continued to decline. Due to excessive pessimism about the future market, without approval, the company’s futures traders closed their positions without authorization, resulting in a total loss of 551053 million yuan in the company’s account. Afterwards, although the trader and his father-in-law raised funds to fully compensate for the loss, the operation of “closing positions without authorization” has broken the rules.
Further investigation by the regulatory authorities found that in September 2021, Jinzi Ham Co.Ltd(002515) the futures account invested a total of 70 million yuan, exceeding the amount of 50 million Yuan approved by the board of directors. In addition, Jinzi Ham Co.Ltd(002515) ‘s futures business risk control system has some defects, such as lack of effective supervision of accounts, inadequate operation authorization management and so on.
“Making too much” also indicates a deviation from the original intention of hedging. In April 2020, considering that raw materials could not be bought at a reasonable price in the market, Chongqing Qin’An M&E Plc(603758) began to establish long positions in futures. In about five months, it made 769 million yuan, which caused an uproar in the market. However, some insiders believe that the company’s long positions obviously exceed the normal demand for raw materials and have been suspected of speculation.
There are also cases of breaking away from the main business and trying to start a new business. For example, Hangzhou Haoyue Personal Care Co.Ltd(605009) main products are baby diapers, adult diapers and sanitary napkins, etc. they actually choose coking coal, coke and other products for hedging, resulting in large losses.
In November 2021, the company announced that it was going through relevant procedures for cancellation of futures account and would terminate its futures investment and related plans. It is estimated that the company invested 153 million yuan in futures investment in 2021, with a total loss of 45.83 million yuan.
Similarly, Shandong Gold Phoenix Co.Ltd(603586) . It is disclosed that in December 2020, after making the prediction that the steel price will fall, the company sold short the hot coil of main raw materials. With the continuous rise of hot coil prices, the company further increased its positions (from 1600 to 8500), and closed its positions in May 2021, resulting in a transaction loss of 87.25 million yuan. The company has obviously deviated from the normal demand of hedging by selling the raw materials to be purchased.
“The first essence of hedging is to match futures and spot. The higher the degree of matching, the smaller the risk. As the world’s largest nickel producer, why does Qingshan group have such a big trouble? Because it does correlation hedging, Qingshan’s products are high matte nickel (second-class products), and LME delivers nickel sectors and nickel beans (first-class products) with higher purity.” A researcher from a futures company in Beijing told reporters.
jointly build a healthy ecology
Rushing to avoid risks to participate in hedging, why does it lead to new risks? How to prevent hedging speculation?
According to the person in charge of a futures company interviewed, enterprises are mainly faced with problems such as unfamiliar with the use of derivatives, imperfect risk control system and non-standard financial treatment. Unfamiliar with the characteristics and trading system of futures, options and other instruments directly restricts the willingness of enterprises to participate. “Want to do but dare not do” is a direct problem faced by many enterprises with actual risk management needs. At the same time, there is a lack of perfect risk control system within the enterprise, and there is a lack of effective decision-making in position and fund management. Some enterprises also lack relevant financial systems and hedge accounting skills and experience.
In many years of hedging services, futures companies have also summarized some experience. The implementation of investment and education, the establishment of enterprise system and the coordination between enterprises and financial institutions are all effective means for service industry enterprises to do a good job in hedging. Systematic training for enterprises is the basis for enterprises to understand the application of financial derivatives, help enterprises establish a perfect hedging system and organizational structure, and assist enterprises to participate in the pilot projects of the exchange, so that enterprises can more standardize their own hedging and reduce the hedging cost.
In recent years, the regulatory authorities have also continued to promote the improvement of rules and strive to escort the sound and healthy development of hedging business at the policy and institutional level.
At the beginning of 2020, SASAC issued the notice on matters related to effectively strengthening the management of financial derivatives business, which clearly proposed that the development of financial derivatives business should strictly abide by the principle of hedging, for the purpose of reducing the risk exposure of real goods, match with the variety, scale, direction and duration of real goods, and adapt to the financial strength and transaction processing ability of enterprises, and shall not carry out any form of speculative transactions. At the same time, it is emphasized to comprehensively evaluate the profit and loss of financial derivatives business and the profit and loss of real goods, so as to prevent speculation caused by one-sided emphasis on the unilateral profit of financial derivatives business.
With information disclosure as the core, Shanghai and Shenzhen exchanges have also formulated detailed rules for hedging.
The Shenzhen Stock Exchange stipulates that when a listed company carries out hedging transactions, the management shall issue a feasibility analysis report, submit it to the board of directors for deliberation, approval and disclosure, and the disclosure contents include the subject matter, amount, term and amount of the transaction. If the total loss or floating loss of the fair value impairment of futures and other derivatives of hedging transactions and the change of risk hedging asset value of the listed company reaches 10% of the audited net profit attributable to shareholders of the listed company in the latest year or the absolute amount exceeds 10 million yuan, the listed company shall disclose it in time.
The industry information disclosure guidelines of various listed companies issued by Shanghai Stock Exchange also have specific disclosure requirements for hedging business. For example, Article 21 of the guidelines for industry information disclosure of listed companies No. 8 – iron and steel (revised in 2020): “If a listed company engages in hedging business such as steel, iron ore, coke and other commodity futures, which may have a significant impact on the company, it shall perform internal decision-making procedures in accordance with laws, regulations and the articles of association, and disclose the transaction types, margin scale, main business risks and risk control measures of hedging business.” In addition, the information disclosure guidelines of chemical industry, non-ferrous metals, air transportation and other industries also involve the normative requirements for information disclosure of hedging by Listed Companies in relevant industries.
It is reasonable to believe that with the improvement of system guarantee, as a risk management tool to stabilize the risk of price fluctuation and smooth enterprise profits, hedging business will play a more “booster” role in the steady development of listed companies.
