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Lian FA Textile, Busy Hedging

2010/11/8 11:03:00 57

Jiangsu

Joint hair textile

Limited by Share Ltd (002394, hereinafter referred to as "Lian FA share") intends to invest 50 million yuan for cotton hedging.

According to its description, cotton is its raw material. If hedging is performed, it should be bought forward contracts.

When cotton prices have risen nearly 1 times, buying forward contracts for hedging, and the risks are self-evident. When the 50 million yuan investment funds fall sharply, cotton prices will fall sharply, which will require a huge amount of capital to make up, which will bring high risks to enterprises and investors.

According to the 2010 annual semi annual report of the joint stock company, its main business cost was 729 million yuan in the first half of 2010.

Textile industry

The cost of cotton accounts for an average of 60% to 70% of the cost of production, and the amount of cotton should be close to 500 million yuan.

It is estimated that the amount of cotton produced by the joint stock company will reach 1 billion yuan a year.

Considering that the price of cotton has risen sharply in the second half of this year, the amount needed to cover the joint stock issue is far higher than 1 billion yuan.

According to the announcement of the joint stock issue, the company prepared only 50 million yuan for the first period, equivalent to 5% of the margin.

Cotton futures

The trading margin needs about 10%, that is to say, the joint venture shares may not be able to cover all the cotton consumption, and at the same time, 50 million yuan will also be used most of the money.

Therefore, the related risks also appeared.

Although the risks associated with the announcement of the joint stock issue may be encountered, the risks of margin trading and price fluctuation are mentioned, but it is not clear.

The risk of price fluctuation is mainly the risk of falling cotton prices.

According to the response measures of many production enterprises at present, quite a lot of enterprises are developing cotton substitution products vigorously, so the demand for cotton will drop in the future. If cotton prices can remain high for a long time, it is not easy to say that once cotton prices fall, it will bring huge investment losses to the joint stock company.

In addition, margin trading also poses a high challenge to the cash payment ability of the joint stock issue. According to the futures trading rules, if the margin is insufficient, it will have to be added at the latest the next day, otherwise it will be forced to liquidate.

At the same time, we will double the margin level when we meet the New Year holidays. Under such a background, the joint stock will have to leave a lot of funds for preparation, which will also cause great financial and psychological pressure on them.

At the same time, if the company fails to carry out the warranty, the purchase cost of raw materials will be much higher than that of other enterprises. At that time, there will be a certain impact on the company's product sales, which will affect the company's performance.

Therefore, when cotton prices are too high, the need for hedging should be cotton producers rather than cotton companies. In retrospect, Chinese enterprises who crazily carry out insurance packages near the US $150 are all scarred by the fall in oil prices. Although inflation expectations are getting higher and higher, it may not be wise to catch up with cotton. It is prudent for listed companies to hedge their futures market. Hedging should be selected at low cotton prices.