With the US Federal Reserve continuously raising interest rates, the US dollar index has hit a new 20-year high, the RMB exchange rate volatility against the US dollar has increased, and the number of listed companies carrying out hedging in the foreign exchange futures market has increased intensively, setting off a round of foreign exchange hedging fever.
Since August, 95 A-share listed companies have issued announcements on carrying out foreign exchange hedging business or increasing the amount of foreign exchange hedging. Data from the hedge network show that in the first half of this year, 724 companies issued announcements related to foreign exchange hedge, more than the total number of last year.
Recently, the State Administration of Foreign Exchange said that enterprises have increased awareness of exchange rate risk neutrality and reasonable management of exchange rate risks. From January to August 2022, the ratio of corporate hedging has been further increased to more than 25%.
In 2 months, 95 listed companies issued foreign exchange hedging announcements
Since the beginning of this year, the foreign exchange market has fluctuated sharply due to factors such as the COVID-19 epidemic, the US Federal Reserve's interest rate hike and the conflict between Russia and Ukraine.
On September 28, the exchange rate of the offshore dollar against the yuan fell below 7.2, hitting the lowest value since the release of the offshore yuan data in 2011, and the onshore yuan hit the lowest since 2008. On September 29, the offshore USD/RMB exchange rate returned to 7.15, up 1,000 basis points; On October 5, the offshore dollar-yuan exchange rate returned to 7.0.
In the face of large fluctuations in the exchange rate, many foreign trade enterprises with import and export business feel great pressure. In order to avoid exchange rate risk, many listed companies involved in foreign trade business have issued foreign exchange futures hedging announcements.
According to the statistics of Chinese reporters from brokerages, since August, 95 A-share listed companies have issued announcements on carrying out foreign exchange hedging business or increasing the amount of foreign exchange hedging.
On September 30, Yatong announced that the holding subsidiary Yatong Energy intends to carry out foreign exchange derivatives trading business, including but not limited to international and domestic financial foreign currency derivatives transactions, forwards, swaps contracts, etc. "The total amount of foreign exchange derivatives trading business shall not exceed 500 million US dollars, and all the above quota shall be used to carry out hedging business related to the main business, prevent foreign exchange risks caused by changes in exchange rate prices, and do not engage in speculation and arbitrage trading."
On September 16, the Board of Directors of the Group agreed that the Company and its holding subsidiaries use their own funds to carry out foreign exchange hedging business with a total amount not exceeding 900 million yuan or other equivalent foreign currencies.
On September 14, Yunda Shares announced that in order to better cope with exchange rate risks and lock in transaction costs, the company and its holding subsidiaries intend to carry out foreign exchange hedging products, and the transaction amount at any time within 12 months will not exceed 300 million US dollars or equivalent RMB.
It is worth noting that in the first half of this year, 724 companies issued foreign exchange hedging related announcements, which exceeded the total number of last year. Among them, there are 449 listed companies in Shenzhen, 266 listed companies in Shanghai and 9 listed companies in Beijing Stock Exchange.
In terms of scale, foreign exchange hedging enterprises are mainly large and medium-sized enterprises. In the first half of 2022, the proportion of large, medium and small enterprises was 83.29%, 16.16% and 0.55%, respectively, and the proportion of small and medium-sized enterprises increased. From the perspective of industry distribution, the number of foreign exchange hedging enterprises in electronics, machinery and equipment, basic chemical industry, power equipment, medicine and biology industries is large.
The scale of foreign exchange hedging increased significantly, and the hedging ratio exceeded 25%
With the further improvement of the market-oriented formation mechanism of the exchange rate, the two-way floating and flexibility of the RMB exchange rate has been enhanced, and relevant enterprises are increasing their efforts to avoid risk through foreign exchange derivatives.
On October 4, the State Administration of Foreign Exchange said that major participants in the foreign exchange market, such as banks and enterprises, have gradually adapted to two-way fluctuations in exchange rates and generally maintained rational trading patterns. The awareness of neutral exchange rate risk of enterprises has increased, and more enterprises have prudently arranged the monetary structure of assets and liabilities and reasonably managed exchange rate risks, guided by the soundness and sustainability of their financial position.
"In 2021, the scale of foreign exchange derivatives such as forwards and options used by enterprises to manage exchange rate risks totaled more than $1.4 trillion, a two-fold increase from 2012; The corporate hedging ratio reached 22%, up 9 percentage points from 2012, and further increased to more than 25% in January-August 2022."
However, it is more important for companies to enhance their currency risk management expertise. Before enterprises carry out foreign exchange trading business, they should first establish a scientific and sound hedge management system, and improve the professional construction of the team through regular training. In addition, enterprises should do rational hedging, reasonable hedging, can not unilaterally bet on the appreciation and depreciation of the renminbi, beware of hedging into speculation.
Looking ahead to the fourth quarter, the trend of the RMB exchange rate has also attracted market attention.
The central bank held a video conference on the national foreign exchange market self-discipline mechanism on September 28, pointing out that the two-way floating of the renminbi is the norm, "maintaining basic stability has a solid foundation", and on September 28, the foreign exchange risk reserve ratio of forward foreign exchange sales business was raised from 0 to 20%, stabilizing market expectations.
The team of Dr. Huang Wentao, chief economist of Citic Jiandao Securities, said that specifically to the recent market, in the relationship between exchange rates and interest rates, they are more inclined to think that overseas tightening led to exchange rate depreciation is the main reason, in this context, the market expects the central bank's easing attitude will change, and the funds will be temporarily tense, thereby driving interest rates up.
The team said that, as stated in the previous report, this round of depreciation did not lead to a large outflow of capital (different from the 2015 cycle), the central bank will not take the initiative to tighten (different from the 2018 cycle), and it is still using forward foreign exchange risk reserves, foreign exchange deposit reserves and other ways to increase friction intervention, and it has not significantly used foreign reserves. The money rate does not have the conditions to rise significantly.
Looking ahead to the trend of the RMB against the US dollar in the fourth quarter, the Research Institute of the Bank of China believes in the latest China Economic and Financial Outlook Report that the RMB exchange rate in the fourth quarter will continue to be under pressure in the short term, but the downside space is limited, and the medium and long term trend has strong resilience.
Source: Brokerage China
