Baifuqin Investment Holding Co., Ltd. was established at the end of 1988, and was co-founded by Du Huilian, chairman of the group, and Liang, director and general manager. In just a few years, its business has spread all over the Asia-Pacific region. The Group mainly provides customers with various comprehensive investment banking and securities brokerage services. Baifuqin has developed from an initial capital of HK$ 300 million to a multinational investment bank with total assets of HK$ 24 billion. It has 28 branches in Southeast Asia, Europe and America, covering securities, futures brokerage, fund management, investment and financing, underwriting and listing, etc.
1997 in the second half of the year, the global financial storm broke out. In this financial crisis, the exchange rates of Thai baht, Philippine peso, Malaysian git, Indonesian rupiah and Singapore dollar fell sharply against the US dollar, hitting record lows. Because Baifuqin invested heavily in the Southeast Asian market and held huge claims in Asian currencies, the collapse of Southeast Asian currencies caused irreparable losses to it.
At the same time, the turmoil in the foreign exchange market has also brought about a sharp decline in the stock market. 1October 23rd 1 1700, the Hang Seng Index plunged from 1 10426, with a decrease of 10.4%. 1October 24th 10, the Hang Seng Index rebounded slightly, but1October 28th 1438, the Hang Seng Index plunged again, setting a historical record and closing at 9059. 1October 20-28 10, the Hang Seng Index fell by 454 1 point, or 33.4%. Based on the market value of Hong Kong stocks of US$ 300 billion on July 3rd, it has lost about US$140 billion by October 28th. As a securities business, the stock loss of Baifuqin from July 1997 to July 10 is estimated to be at least close to1000 million Hong Kong dollars.
1998 65438+1October 12 At 5 pm, Baifuqin declared bankruptcy.
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Case study topic: In 20×7 years, 65438+ 10, China Group signed an export order of 10,000 USD with an American company. At that time, the exchange rate of USD/RMB was 7.20. By the time of delivery half a year later, the RMB had greatly appreciated, and the exchange rate of USD/RMB was 7.00. Due to the change of RMB exchange rate, the company lost RMB 2 million.
After this incident, in order to strengthen foreign exchange risk management and effectively improve the company's foreign exchange risk prevention level, the company held a high-level meeting on strengthening foreign exchange risk management in March 20×7, summed up the experience and lessons of this loss, and formulated the company's foreign exchange risk management countermeasures. The main points of relevant personnel's speeches are as follows:
General Manager Chen Mou: Let me make two comments first: (1) It is very important to strengthen foreign exchange risk management, and we must attach great importance to it. (2) Foreign exchange risk management should focus on the key points, especially the management of transaction risk and conversion risk, and practical measures must be formulated to prevent exchange rate changes from eroding the company's profits.
Wu Mou, Executive Deputy General Manager: I totally agree with the general manager. Under the background of relatively stable RMB exchange rate, as long as the production is done well and the orders are completed, the profits will not be realized. However, the formation mechanism of RMB exchange rate in China has changed, and we can no longer stick to the previous management methods and ignore exchange rate risks. We must take necessary measures to protect the value of all foreign exchange assets and liabilities. In addition, the general manager's views on strengthening translation risk management are also very important. The overseas subsidiaries we have established will be put into operation soon, and necessary measures should be taken to hedge the translation risk and avoid book losses.
Chief Accountant Li: It is really important to strengthen foreign exchange management. Recently, I have made a preliminary study on the related issues of foreign exchange risk management, and found that there are still many financial tools for foreign exchange risk management. When any financial instrument is used for hedging, it will also lose the benefits brought by favorable exchange rate changes. The losses and gains of foreign exchange mainly depend on the time and extent of exchange rate changes. Therefore, to strengthen foreign exchange risk management, we should first pay attention to the study of exchange rate trends and take different countermeasures according to different exchange rate trends.
Chairman Zhang: I agree with all the above statements. Finally, two suggestions are made: (1) ideological understanding should be in place. Since July 2, 2005, China began to implement a managed floating exchange rate system based on market supply and demand and with reference to a basket of currencies. The RMB exchange rate is no longer pegged to a single dollar, forming a more flexible RMB exchange rate mechanism. Under this macro background, it is necessary to take measures to strengthen foreign exchange risk management. (2) It is suggested that the Finance Department set up a foreign exchange risk management team, headed by the manager of the Finance Department, to be responsible for the daily work of foreign exchange risk management.
Requirements:
(1) Does the exchange rate given in the title adopt direct quotation method or indirect pricing method?
(2) What risks do the examples in the title reflect?
(3) From the basic principles of foreign exchange risk management, what are the improper speeches made by the General Manager, the Executive Deputy General Manager, Chief Accountant Li and the Chairman? And briefly explain the reasons respectively.
Analysis hint
(1) Direct quotation
(2) Transaction risk
(3)
—— General Manager Chen Mou:
The viewpoint on the main points of foreign exchange risk management is inappropriate.
Reason: For an enterprise, economic risk is more important than conversion risk and transaction risk, because its impact is long-term, while the impact of conversion risk and transaction risk is one-off.
—— Executive Deputy General Manager Wu Mou:
(1) It is not appropriate to adopt hedging measures for all foreign exchange assets and liabilities.
Reason: Foreign exchange assets and liabilities may increase or decrease in value due to exchange rate changes, which may naturally offset, so it is not necessary to take hedging measures for all foreign exchange assets and liabilities.
(2) Not suitable for hedging translation risks.
Reason: reducing translation risk may increase transaction risk at the same time. Therefore, if the conversion risk does not affect cash flow, there is no need to hedge the conversion risk.
-Chief Accountant Li:
(1) The view that "taking any financial instrument to hedge risks will also lose the benefits brought by the favorable exchange rate changes" is inappropriate.
Reason: Financial instruments such as forward foreign exchange trading and foreign exchange futures are used for hedging. By locking the exchange rate, we can avoid the losses caused by unfavorable exchange rate changes, but at the same time we will also lose the benefits brought by favorable exchange rate changes. Financial instruments with foreign exchange options can avoid the losses caused by unfavorable exchange rate changes and enjoy the benefits brought by favorable exchange rate changes.
(2) The view that "the gains and losses of foreign exchange mainly depend on the time and range of exchange rate changes" is inappropriate.
Reason: The gain and loss of foreign exchange depends on three factors: (1) foreign exchange exposure affected by exchange rate changes; (2) the impact of exchange rate changes on foreign exchange assets and liabilities; (3) Time and extent of exchange rate changes.
—— Chairman Zhang:
It is not advisable to suggest that the finance department set up a foreign exchange risk management team, with the manager of the finance department as the team leader, responsible for the daily work of foreign exchange risk management.
Reason: Foreign exchange risk includes economic risk, transaction risk and conversion risk, among which economic risk involves all aspects of production, sales, raw material supply, location and other management. Therefore, the management of economic risks has gone beyond the responsibilities of the financial department, but needs the cooperation of all departments and Qi Xin to achieve the purpose of managing economic risks by adjusting business strategies and adopting internal management methods.