Lutai A to deal with exchange rate risk in derivatives trading (figure)

The pressure to revalue the renminbi is testing export-oriented companies, and in order to reduce the risk of currency exchange, Lutai A (000726) announced today "the next 12 months of derivatives trading plans." Lutai A said that in order to circumvent the various exchange rate and interest rate risks that the company faces, it is recommended to use the forward-sale, forward-forex trading currency and interest-rate swaps and currency swaps and other financial products offered by commercial banks to avoid exchange rate risk and interest rate risk.　　The total amount of the above traded species in the next 12 months (i.e. from now to the end of June 2011) is limited to 100% of the export amount of 2009. It can be said that Lutai A is also forced to do so. At present, the trend of appreciation of the renminbi is very clear, China's April trade surplus again, Guotai macro-analyst said that the future trade surplus is likely to expand further, May may rise to more than 5 billion U.S. dollars.　　The widening of the surplus has further increased the pressure on the renminbi to appreciate, and it is expected that the renminbi will resume appreciation within 2 quarters. Lutai A's operating income structure is an important reason for companies to carry out derivative transactions. The announcement shows that Lutai A's business to import and export, the proportion of exports has been more than 75%, 2010, the planned exports of 418 million U.S. dollars, export earnings are almost all U.S. dollars. And more than 60% of the procurement expenditure in the domestic payment in renminbi, so the annual settlement volume is large, the renminbi appreciation of the company in dollar-denominated export income constitutes a great risk. The 2010-Year plan imports 95.74 million U.S. dollars, imports in addition to the United States dollar, but also a large number of euros and yen to pay demand, so faced with a greater risk of exchange rate fluctuations.