RMB keeps rising! Export enterprises emergency settlement of foreign exchange gains and losses distort profits

category:Finance
 RMB keeps rising! Export enterprises emergency settlement of foreign exchange gains and losses distort profits


In the first half of the year, some export enterprises have made forward settlement of half of the US dollar income next year, and the remaining half are still waiting to see, because they think the RMB may fall back after the rebound. But now it seems that this expectation has failed, and enterprises are afraid that the RMB will keep rising, so this week, it is urgent to make forward settlement of the remaining exposure The bank said to reporters.

For enterprises, if RMB rises to around 6.3 against the US dollar next year, and the enterprises do not lock in their exposure now, they may only exchange 6.3 million yuan for the same $1 million income next year. Now, after handling the long-term settlement of foreign exchange, it can ensure that they can get about 6.7 million yuan, which is also convenient for enterprises to make financial planning in advance. Another foreign bank foreign exchange strategist told first finance.

However, among many export-oriented enterprises, there are not many such enterprises as this one that urgently lock up foreign exchange. After reviewing the annual reports of Listed Companies in 2019, ifnance found that even those companies which are more sensitive to exchange rate fluctuations and whose exchange gains and losses account for a large proportion of net profits, rarely take exchange rate management and risk measures. Even if they do, they are small-scale trial transactions without hedging awareness, and they have old problems such as insufficient subjective initiative and fear of being held accountable for misjudgment.

Exchange gains and losses distort profits

For example, Changhai shares, whose business includes glass fiber and products and chemical industry, is a typical one. The companys export accounts for 24%. Despite the recovery of export, the expectation of price increase of products and the expected improvement of profitability, the exchange gains and losses in the third quarter obviously distort the enterprises profits. In the first three quarters, the company achieved revenue of 1.477 billion yuan, which was - 11.3% year-on-year; the net profit attributable to parent company was 196 million yuan, which was - 16.4% year-on-year; the non parent net profit was 184 million yuan, which was - 17% year-on-year. In the third quarter, the single quarter revenue and parent net profit were 571 million yuan and 72 million yuan respectively, which were - 1.6% and - 18.7% year-on-year. The reason why the companys profit in the third quarter fell a lot on a year-on-year basis was mainly due to the increase of exchange loss, in which the sales, management and financial expense rates increased by 0.4, 0.3 and 0.6 percentage points respectively, which led to the failure to realize the profit normalization in the first three quarters as expected.

According to the reporters understanding, the glass fiber industry in which the above enterprises are located has entered the price upward channel since September. With the gradual implementation of the companys price adjustment, the institutions all expect that the profitability of the enterprise is expected to increase. However, in view of the RMB appreciation rate in the fourth quarter, the distortion effect of exchange gains and losses on earnings can not be ignored.

From the perspective of stock price performance, Fuyao Glasss share price has risen synchronously with the economic recovery this year, but the stock price has been in a volatile situation since November.

In fact, this kind of valuation distortion caused by exchange gains and losses also occurs from time to time. For example, as early as the end of the first quarter of 2018, the central parity rate of RMB against the US dollar rose by 3.5% compared with that at the beginning of the year. One month after the middle of April of that year, the RMB began to adjust in reverse, and the US dollar index rose by 5.4%, the largest increase since November 2015. When the foreign currency monetary items exceed a certain proportion of the total assets, the profits of the companies with foreign currency monetary items exceeding a certain proportion of the total assets are all roller coaster like fluctuations due to exchange gains and losses. At the same time, the floating loss and profit formed by exchange gains and losses also cover up the real growth of enterprise performance.

Neutral hedging should not be ignored in the context of increasing volatility

According to first finance and economics, recently, international investment banks have generally raised the forecast value of RMB exchange rate in 2021, basically from the previous range of 6.5-6.7 to 6.2-6.4, but the fluctuation will continue to enlarge. The central bank has cancelled the risk reserve for forward foreign exchange purchase and suspended the countercyclical factor. Recently, the RMB is completely in the state of free floating , and it seems that the central bank is also observing. Iris Pang, Chinas chief economist at ing, told reporters earlier that the annual fluctuation range of the RMB has been expanding, with a difference of 7% between the highest and the lowest in 2019, which has reached nearly 10% as of November 9 this year. It is expected that the fluctuation range can be expanded to 13% (6-6.8 range) next year, and the USD / RMB ratio will reach 6.3 by the end of 2021.

Despite the strong expectation of RMB appreciation, if there are twists and turns in vaccine prospects and geopolitical risks, cant the US dollar rise again? If the U.S. economy recovers next year and Chinas economy returns to normal, how will the exchange rate change under the background of narrowing the growth gap? At the end of the year, Chinese enterprises have a large demand for foreign exchange settlement, which may also lead to a stronger RMB. However, from the beginning of next year, the demand for foreign exchange settlement will decline. At that time, we need to observe the changes in the foreign exchange market. Guan Tao, the global chief economist of BOC securities, told reporters that sometimes when a currency rises too fast, it may also fall back quickly. Mainstream institutions believe that in a wide range of fluctuations, enterprises should regularly carry out hedging on a regular and pro rata basis according to actual needs, which is more conducive to financial planning. Source of this article: Guo Chenqi, editor in charge of first finance and Economics_ NBJ9931

Despite the strong expectation of RMB appreciation, if there are twists and turns in vaccine prospects and geopolitical risks, cant the US dollar rise again? If the U.S. economy recovers next year and Chinas economy returns to normal, how will the exchange rate change under the background of narrowing the growth gap? At the end of the year, Chinese enterprises have a large demand for foreign exchange settlement, which may also lead to a stronger RMB. However, from the beginning of next year, the demand for foreign exchange settlement will decline. At that time, we need to observe the changes in the foreign exchange market. Guan Tao, the global chief economist of BOC securities, told reporters that sometimes when a currency rises too fast, it may also fall back quickly.