For listed companies with more international business, foreign exchange hedging is an important measure to resist exchange rate risk. According to the incomplete statistics of the announcement of listed companies sorted out by the reporter of Securities Daily, as of April 16, 104 listed companies issued the announcement of carrying out foreign exchange hedging business or continuing to carry out this business. From the perspective of industry, these listed companies are mainly concentrated in industries such as industry, information technology, medical care, raw materials and non daily consumer goods.
In recent years, enterprises’ awareness of exchange rate risk neutrality has increased, and the foreign exchange hedging ratio has increased steadily. According to the data recently released by the central bank, in 2021, the scale of foreign exchange risk management by enterprises using forward, options and other foreign exchange hedging products increased by 59% year-on-year, 36 percentage points higher than the growth rate of bank foreign exchange settlement and sales in the same period, and the proportion of corporate hedging increased by 4.6 percentage points year-on-year to 21.7%.
Nanhua Futures Co.Ltd(603093) macro foreign exchange analyst Wang Ying said in an interview with the reporter of Securities Daily that since the outbreak of covid-19 pneumonia, the uncertainty of global economic policies has increased, resulting in more frequent two-way fluctuations of exchange rate. Listed companies’ participation in foreign exchange hedging is mainly to avoid exchange losses and lock in import costs caused by violent exchange rate fluctuations. The growth of enterprise hedging scale reflects that more and more enterprises begin to realize the importance of foreign exchange risk management.
Listed companies have disclosed the necessity or purpose of foreign exchange hedging in relevant announcements. Taking Hangzhou Hikvision Digital Technology Co.Ltd(002415) as an example, it summarized the situation of foreign exchange hedging transactions in the “announcement on carrying out foreign exchange hedging transactions in 2022” issued on April 16. In terms of investment purpose, the company said that import and export business is one of the main businesses of the company. In order to avoid the exchange rate risk faced by import and export business, the company plans to use foreign exchange hedging trading tools to prevent foreign exchange exposure.
Another example is Jiangsu Yuyue Medical Equipment And Supply Co.Ltd(002223) 113, which announced that due to the recent frequent fluctuations in the international economic and financial environment and other factors, the uncertainty of RMB exchange rate fluctuations has increased. In order to prevent the risk of exchange rate and interest rate fluctuations and reduce the impact of market fluctuations on the company’s operation and losses, the company plans to carry out foreign exchange hedging business related to daily operation.
From the perspective of the business types involved in foreign exchange hedging carried out by listed companies, it mainly includes forward foreign exchange settlement and sales business, foreign exchange swap business, currency swap business, foreign exchange option business and other foreign exchange derivatives business. The currencies involved depend on the main settlement currencies used by the company’s specific international business, mainly including US dollar, euro, Japanese yen, etc.
It is worth mentioning that listed companies mentioned in their announcements that “foreign exchange transactions for the purpose of speculation are not carried out”. Most foreign exchange hedging businesses are based on normal production and operation, relying on specific business operations, and aiming at avoiding and preventing exchange rate risks.
However, Wang Ying said that at present, some enterprises will ignore the importance of foreign exchange hedging when the exchange rate trend is conducive to their own transactions, with a small proportion of hedging and large risk exposure. At the same time, foreign exchange hedging is still mainly foreign exchange forward, and less used for foreign exchange options, futures and other derivatives trading instruments.
Therefore, Wang Ying suggested that listed companies should reasonably control their risk exposure and flexibly use diversified foreign exchange derivatives. Due to the strong professionalism of foreign exchange derivatives trading, it is suggested that listed companies should participate in relevant roadshows and exchanges held by professional institutions such as futures companies, so as to achieve efficient risk avoidance on the basis of a better understanding of the trend of exchange rate, influencing factors and the use of relevant tools.
