The RMB fell sharply and investors were worried about the impact of exchange rate fluctuations on listed companies.
On April 25, the onshore RMB closed at 6.5544 against the US dollar at 16:30, down 669 points from the previous closing price, a new low since April 2 last year. Offshore RMB also broke through the 6.6 mark as of around 19:00.
In fact, since the 20th, the exchange rate of RMB against the US dollar has been callback rapidly, and A-share listed companies have also intensively disclosed hedging in the foreign exchange futures market. According to the reporter’s incomplete statistics, since the 20th, about 35 listed companies have issued an announcement on carrying out foreign exchange hedging business. Involving many industries such as science and technology communication, medicine, chemical industry and textile, relevant companies have a large number of trade businesses, which are intended to avoid the risk of exchange rate fluctuation in the foreign exchange market by carrying out foreign exchange hedging business.
From the market performance, as of the closing of the 25th, the main A-share stock index fell sharply, the Shanghai Composite Index fell 5.13%, below 3000 points, the Shenzhen Component Index fell 6.08%, the gem index fell 5.56%, and the net outflow of funds from northbound was 4.505 billion yuan.
Xingshi investment believes that this round of RMB devaluation began in the offshore market, mainly due to the strong rise of the US dollar. However, although the pressure of RMB devaluation has increased, rapid and substantial devaluation is not normal. On the one hand, the settlement and sale of foreign exchange by enterprises still support the RMB exchange rate; On the other hand, the Fed’s tightening expectation may have reached a climax, and the possibility of further intensification is decreasing.
listed companies have launched foreign exchange hedging
On the investor interaction platform of Shanghai and Shenzhen Stock Exchange, many investors are worried about the impact of exchange rate fluctuations on the business of listed companies.
Wu Qiong, director of the research department of honeycomb fund, told the first financial reporter that the depreciation of RMB mainly affects companies with international business. For enterprises that need to import raw materials and whose product sales are mainly denominated in RMB, the import cost will be increased due to the depreciation of exchange rate. If there is no hedging of import cost pressure, it will be damaged.
For example, an investor asked Yotrio Group Co.Ltd(002489) how much impact will exchange rate fluctuations have on the company’s revenue? On April 25, the company said on the investor interaction platform that the fluctuation of RMB exchange rate is long-term and uncertain. In order to reduce its uncertain impact, the company handled hedging businesses such as forward foreign exchange settlement and sales as authorized by the general meeting of shareholders. It is emphasized that the short-term fluctuation of RMB exchange rate has less impact on the company’s income.
In order to cope with the risks brought by the decline of the RMB exchange rate, about 35 listed companies issued foreign exchange hedging announcements in the past week.
Specifically, on the 25th, Ginlong Technologies Co.Ltd(300763) ( Ginlong Technologies Co.Ltd(300763) . SZ) said that as the main settlement currencies of the company’s product exports and the import of equipment and raw materials are US dollars, British pounds and euros, the profits and losses caused by exchange rate fluctuations will have a certain impact on the company’s operating performance. In order to lock in the cost of foreign exchange purchase, reduce the impact of exchange rate fluctuations on the company’s performance, improve the use efficiency of foreign exchange funds and reasonably reduce financial expenses, the company plans to carry out foreign exchange hedging business.
Bosun Co.Ltd(002282) z ( Bosun Co.Ltd(002282) .sz) said that with the development of the company’s international trade and investment business, the company’s exposure to foreign exchange income and expenditure has become larger and larger. In order to effectively avoid and prevent the adverse impact of large exchange rate fluctuations on the company’s operation and control foreign exchange risks, the company plans to carry out foreign exchange hedging business with banks.
In terms of the types of foreign exchange hedging, the foreign exchange hedging business Bosun Co.Ltd(002282) plans to carry out is the forward foreign exchange trading business handled in the bank to avoid and prevent exchange rate risks in order to meet the needs of normal production, operation and investment business, including forward foreign exchange settlement and sales business, RMB and foreign currency swap business, foreign exchange option business, etc. the main trading currencies are US dollars, euros, etc.
Hailir Pesticides And Chemicals Group Co.Ltd(603639) ( Hailir Pesticides And Chemicals Group Co.Ltd(603639) . SH) Company and its subsidiaries have a large amount of foreign trade business every year. The company claims that it may suffer losses due to the change of exchange rate between RMB and US dollar. The company plans to carry out foreign exchange hedging business and fix the exchange transaction cost at a certain level in advance, which can effectively avoid unexpected risks caused by large exchange rate fluctuations.
Zhejiang Zhaolong Interconnect Technology Co.Limited(300913) ( Zhejiang Zhaolong Interconnect Technology Co.Limited(300913) . SZ) said that the foreign exchange hedging business was carried out due to the continuous development of the company’s foreign market, the overseas business accounted for a large proportion, and the foreign exchange settlement was mainly in US dollars. In order to prevent foreign exchange risks, the company and its subsidiaries intend to carry out foreign exchange hedging business with banks and other financial institutions approved by relevant government departments and qualified for foreign exchange hedging business Zhejiang Zhaolong Interconnect Technology Co.Limited(300913) the specific methods or products of foreign exchange hedging business to be carried out include but are not limited to forward foreign exchange settlement and sales, foreign exchange swaps, foreign exchange options and other foreign exchange derivatives.
Industry insiders told the first financial reporter that among the current hedging instruments against exchange rate risk, the onshore RMB exchange rate market is mainly through over-the-counter derivatives such as bank forwards and swaps, and the offshore RMB market has on-the-spot risk management tools such as exchange rate futures and options. The rational use of various tools, including foreign exchange derivatives, can effectively control and avoid the risk of exchange rate fluctuations.
Ma Cheng, chairman of juze, told the first financial reporter that at present, it is on the eve of the Federal Reserve’s interest rate hike in May. Once the Federal Reserve raises interest rates, the upside down of China US interest rate spread will be more obvious, the risk of foreign capital outflow will increase, and further increase the pressure of RMB devaluation. In order to deal with the exchange loss caused by the decline of RMB exchange rate, listed companies lock in the possible risks of exchange in the future through the futures market, which is very important for export enterprises.
It is worth mentioning that on the 22nd, Wang Chunying, deputy director and spokesman of the State Administration of foreign exchange, said when introducing the foreign exchange revenue and expenditure data of the first quarter that the enterprise hedging ratio increased steadily. In the first quarter, the scale of exchange rate risk management by enterprises using forward, options and other foreign exchange derivatives exceeded 370 billion US dollars, an increase of 29% year-on-year; The corporate hedging ratio was 26%, an increase of 4.2 percentage points over 2021, indicating that the corporate exchange rate risk neutral business philosophy was further strengthened and the adaptability to the fluctuation of RMB exchange rate was improved.
short term favorable to these sectors
“From a fundamental point of view, the devaluation of RMB is good for export enterprises and bad for import oriented enterprises, especially in the case of high bulk prices, which may increase the pressure of imported inflation.” Wu Qiong said.
According to the datayes analysis report of China Unicom data, due to the high proportion of foreign exports in textile and clothing, household appliances, electromechanical and other industries, the depreciation of RMB is conducive to improving their price competitiveness; Upstream production departments such as petrochemical industry, although the price of raw materials rises, have a strong ability to increase the price and transfer the cost to the downstream of the industrial chain. At the same time, the price rise will increase the value of finished product inventory and benefit.
Taking the textile sector with recent market performance as an example, the datayes profit forecast of Tonglian data shows that from the perspective of PEG valuation of textile sub industries, the peg value of sports clothing, cotton textile and home textile industries is less than 1.5% The stocks below the median in each sub industry include Guirenniao Co.Ltd(603555) , Luthai Textile Co.Ltd(000726) ( Luthai Textile Co.Ltd(000726) . SZ), Youngor Group Co.Ltd(600177) , Zhe Jiang Taihua New Material Co.Ltd(603055) , indicating that the above stocks are undervalued in stages.
Accordingly, several stocks in the textile sector have increased significantly recently. Huafang Co.Ltd(600448) ( Huafang Co.Ltd(600448) . SH) has increased the limit for two consecutive trading days, with an increase of nearly 30% on the 5th day and an increase of 43% on Zhejiang Sunrise Garment Group Co.Ltd(605138) 5 day. Lutai textile said on the investor interaction platform on April 25 that the company’s export revenue accounted for about 60%, mainly denominated in US dollars. If the RMB devalues, it will have a positive impact on the company.
Many other companies said that exchange rate fluctuations were good for their business. For example, Zhejiang Fenglong Electric Co.Ltd(002931) said that the company’s export revenue accounted for more than 40% of its revenue in 2021, and the export products were mainly priced in US dollars. The depreciation of RMB exchange rate was conducive to the improvement of the company’s revenue and gross profit margin to a certain extent.
Jiangsu Tongrun Equipment Technology Co.Ltd(002150) said on the investor interaction platform on the 22nd that the devaluation of RMB will have a positive impact on export-oriented enterprises, which will reduce exchange losses and increase exchange gains Zhejiang Jinsheng New Materials Co.Ltd(300849) also responded on the interactive platform that the company’s export revenue accounts for more than 50% of the total revenue. Export sales are mainly settled in US dollars. The depreciation of RMB against US dollars will improve the company’s profitability to a certain extent.
It is worth mentioning that the depreciation of RMB should be analyzed for different industries and enterprises according to the actual situation. Wu Qiong believes that China is an export-oriented country in general, and net exports contribute greatly to GDP, so a certain degree of depreciation is generally good for imports and exports. In the long run, service companies related to foreign trade can also benefit, such as settlement service providers, logistics providers, intermediaries, etc.
In addition, as for whether the exchange rate adjustment suppresses the stock market, Xingshi investment believes that before this round of exchange rate adjustment, A-Shares have undergone a relatively large adjustment, and the exchange rate adjustment may have little medium and long-term impact on the stock market. Although historically, there is a certain correlation between the exchange rate and the stock market trend, in fact, there is no causal relationship between the two, and the stock market response does not necessarily lag behind the exchange rate, After the exchange rate fell, the stock market may not continue to decline unilaterally.
