Enterprises adding foreign exchange hedging to cope with exchange risk

Export companies have significantly increased their awareness of exchange rate risk neutrality - they know that speculative operations such as chasing up and killing down prices often pose greater risks, and they have begun to set reasonable exchange settlement income targets, as long as the Chinese yuanIf the exchange rate reaches this target value, it is safe to settle the foreign exchange in a timely manner.

As of8month30day18At that time, the onshore RMB exchange rate hovered around the US dollar6.9003Nearby, it hit its lowest point in the past two years during trading9.223。

However, compared to the past when import companies rushed to purchase foreign exchange to avoid risks, they now appear quite calm in the face of significant fluctuations in exchange rates.

A financial director of a metal processing enterprise in the Jiangsu and Zhejiang regions that needs to import raw materials told reporters that in the first half of the year, they passed the long-term planforeign exchangeSwap transactions will lock the average price of foreign exchange purchases for external payments in the second half of the year at6.75-6.78Nowadays, even if the RMB exchange rate falls below6.9And there will be no additional increase in the company's foreign exchange purchase fees.

A head of the cross-border business department of a joint-stock bank disclosed to the reporter that in the past six months, many import enterprises have reduced their foreign exchange risk exposure to20%-30%This greatly alleviates their demand for emergency foreign exchange purchases to stop losses due to the decline in the RMB exchange rate.

The reporter learned that this has significantly cooled the "herd effect" in the foreign exchange market.

A Hong Kong bankForeign exchange transactionsThe official stated that despite the skyrocketing US dollar index causing the RMB exchange rate to fall to6.9On the front line, but the emergency purchasing and hedging efforts of import enterprises are significantly lower than in the past, effectively alleviating the decline of the RMB exchange rate. Behind this is the continuous increase in foreign exchange hedging operations by foreign trade enterprises, which is making the RMB exchange rate more resilient.

According to data released by the State Administration of Foreign Exchange, in the first half of this year, enterprises utilized forward contractsoptionWait until the scale of exchange rate risk in foreign exchange derivative management reaches7558100 million US dollars, year-on-year growth29%The foreign exchange hedging ratio has increased compared to the entire year last year4.1Percentage points, reaching26%。 Newly added exchange rate hedging "first time account" enterprises are approaching1.7The vast majority of households are small and medium-sized enterprises.

Wang Chunying, Deputy Director of the State Administration of Foreign Exchange, previously pointed out that in the future, the State Administration of Foreign Exchange will continue to carry out targeted work. Firstly, the State Administration of Foreign Exchange will continue to release the dividends of exchange rate risk management policies, break through the obstacles in policy implementation, strengthen policy transmission to financial institutions, and urge financial institutions to enhance their initiative and professionalism in serving enterprises in exchange rate hedging; Secondly, we will continue to support the replication and promotion of successful practices in exchange rate risk management for small and medium-sized enterprises in places where conditions permit, and make good use of relevant special funds to implement the benefits of fee reduction; Thirdly, we will continue to increase cooperation with departments such as the State owned Assets Supervision and Administration Commission and the Ministry of Commerce, promote the entry of knowledge into enterprises, continuously enhance the awareness of enterprise exchange rate risk neutrality, and provide assistance for enterprises to establish effective exchange rate risk management mechanisms.

Why Import Enterprises No longer Urgently Purchase Foreign Exchange to Stop Loss

The head of the cross-border business department of the above-mentioned joint-stock bank told reporters that compared to the past, import enterprises are now more relaxed in responding to the decline in the RMB exchange rate.

In the past, as long as the RMB exchange rate rapidly fell and reached a low point within the year, import companies demanded emergency foreign exchange purchases to stop losses. However, now, these import companies have already locked in future foreign exchange purchase prices through foreign exchange hedging, and no longer incur additional foreign exchange purchase costs due to exchange rate fluctuations.

The reporter learned that with the increasing awareness of exchange rate risk neutrality among import enterprises, their foreign exchange hedging ratio is also correspondingly increasing. In the past, the proportion of foreign exchange purchases they locked in through forward foreign exchange swap transactions was only30%However, after experiencing significant fluctuations in the RMB exchange rate over the past year, many companies now have foreign exchange hedging ratios exceeding75%, leaving only some but not enough25%The foreign exchange risk exposure has greatly weakened their exchange risk in the face of sharp fluctuations in the exchange rate, and also made them more comfortable in dealing with the risk of sharp fluctuations in the exchange rate.

In addition, there are two factors that cannot be ignored for import enterprises to calmly cope with the significant fluctuations in the RMB exchange rate. Firstly, with the diversification of import channels, import enterprises have chosen a wider range of external payment currencies,euroThe payment proportion of non US currencies such as the Japanese yen has significantly increased. Considering that the decline in the euro and Japanese yen is comparable to the exchange rate of the Chinese yuan, enterprises do not need to pay additional fees for foreign exchange purchases; Secondly, more and more import enterprises are also continuously increasing the RMB settlement limit for cross-border trade, making them less concerned about the risk of exchange rate fluctuations.

The reporter also learned from multiple sources that in the face of the RMB exchange rate falling below6.9The willingness of export enterprises to settle foreign exchange is also quite stable. Behind this, more and more export companies are also locking in foreign exchange settlement prices through foreign exchange hedging.

Although the decline in the RMB exchange rate has caused some export companies to lower their foreign exchange hedging settlement prices than the current exchange rate, resulting in lower settlement amounts for the former. However, many companies do not care about this because they also know that exchange rates often fluctuate greatly. Doing foreign exchange hedging early can actually obtain more stable exchange returns, "said the head of cross-border business department of joint-stock banks.

In his view, as foreign exchange derivatives become increasingly abundant, companies can also solve their own exchange risk through more diversified foreign exchange hedging measures.

Over the past two months, Asian and American options have been highly favored by foreign trade enterprises. One important reason is that the previous European options did not fully meet the foreign exchange hedging needs of enterprises. Specifically, after purchasing traditional European foreign exchange options, companies could only choose whether to exercise them on the maturity date. Failure to exercise them may result in their foreign exchange hedging strategy not achieving the expected results. Nowadays, when companies purchase American options, they can choose to exercise them on any day before the expiration date, which can improve their cash flow situation and achieve foreign exchange hedging goals; Although the settlement date of Asian options is still the expiration date, the reference price is the average market exchange rate during the duration of the option, which is largely in line with the foreign exchange hedging needs of foreign trade enterprises with stable accounting periods. Moreover, the cost of Asian options is lower than that of European options, which can effectively reduce the cost of foreign exchange hedging operations for enterprises.

With the increasingly widespread application of these foreign exchange option derivatives in corporate foreign exchange hedging, more and more companies are no longer afraid of the financial loss risk caused by significant fluctuations in exchange rates, "said the head of the cross-border business department of the aforementioned joint-stock bank.

The herd effect in the foreign exchange market has significantly cooled down

It is worth noting that as companies continue to increase their foreign exchange hedging operations, the herd effect in the foreign exchange market has significantly cooled compared to before.

Previously, as long as the RMB exchange rate fell and reached a low point within the year, many import enterprises would increase their emergency efforts to purchase foreign exchange to stop losses, while export enterprises waited for the exchange rate to further decline before settling foreign exchange, causing a sudden imbalance in the supply and demand relationship in the RMB foreign exchange market, leading to an abnormal sharp drop in the RMB exchange rate. This was once seen as a "clearing problem" in the industry.

Nowadays, as companies increase their foreign exchange hedging capabilities, the herd effect has significantly cooled.

In the past two days, the main institutions selling short of the Chinese yuan have been quantitative investment funds, which have lowered the exchange rate of the Chinese yuan due to the appreciation of the US dollar. However, there has been a significant decrease in foreign exchange buying and selling by enterprises. This is also one of the main reasons why the Chinese yuan exchange rate did not fall significantly, "said the foreign exchange trader at the Hong Kong Bank.

He also found that many export companies are no longer waiting for the exchange rate to further decline, but are focusing on the timing of high exchange settlement. Behind this, there is a significant increase in the awareness of exchange rate risk neutrality among export enterprises - they know that speculative operations such as chasing gains and killing losses often have greater risks, and they have started to set reasonable exchange settlement income targets. As long as the RMB exchange rate reaches this target value, timely exchange settlement and bag placement are the safety measures.

Foreign exchange strategist at Wells Fargo BankBrendan McKennaIt is pointed out that the increase in foreign exchange hedging efforts by Chinese foreign trade enterprises also helps to stabilize the expectation of the RMB exchange rate, as banks will take the enterprise's foreign exchange hedging operations to the forward foreign exchange market for hedging operations. Nowadays, financial institutions will know that foreign trade enterprises have unexpected expectations of the RMB exchange rate, which will invisibly affect their pricing of the RMB exchange rate, making market expectations more "unified".

In his view, the expected stabilization of the RMB exchange rate will make the RMB more resilient under the pressure of the Federal Reserve's continued significant interest rate hikes. Because it helps Chinese enterprises and overseas enterprises expand the scale of cross-border trade settlement in RMB.

"As the strong rise of the US dollar has led to the sharp depreciation of almost all non US currencies, overseas enterprises are now looking for a more robustness currency as the trade settlement currency. If the RMB therefore expands the proportion of cross-border trade and investment settlement, it will not only help the steady progress of RMB internationalization, but also further reduce the exchange rate risk of domestic enterprises."Brendan McKennaexpress.