Exporters seek to hedge exchange rate risks


The China Post staff

The New Taiwan dollar last week continued moving under heavy appreciation pressure on the weakening greenback and the influx of foreign capital. The anticipation of a stronger NT dollar in the next few months has made export-oriented enterprises busy in adjusting their financial management strategies.

While discussing with banks how to reduce potential losses associated with the rising local currency, some companies, particularly the large IT companies, have been negotiating with their downstream suppliers for new pricing formulas.

Exporters are generally advised to purchase forward futures in a bid to set a tolerable range for the exchange rate. Some have even been urged to sell their greenback-denominated assets to prevent further losses.

The rising NT dollar is reported to have caused considerable losses to Taiwan’s large IT companies. Quanta Computer is estimated to have suffered a loss of between NT$300 million and NT$400 million associated with the rising NT dollar during the second quarter. The loss was equivalent to 1-2 percent of the company’s quarterly net profit.

The losses of motherboard makers are relatively smaller thanks to their risk-hedging measures. Asustek Computer estimated its loss to range from NT$50 million to NT$1 billion. Gigabyte reported a loss of around NT$50 million.

Accton estimated a loss between NT$20 million and NT$30 million caused by the rising local currency during the second quarter.

Elitegroup Computer System and Universal Scientific Industrial, in contrast, are benefited from the rising NT dollar thanks to their earlier risk-hedging measures and large amounts of their greenback-denominated liabilities. Elitegroup raised funds through issuing US$120 million ECB (Euro convertible bonds) in early March. The company said that it had taken several measures to hedge the risks associated with exchange rate fluctuation in April and May, and that helped it reap a profit of around NT$10 million from the falling US dollar.

Universal Scientific Industrial also benefited from the rising NT dollar since it had sold in advance certain amounts of greenback-denominated assets in April at an exchange rate of around NT$35.2 to one US dollar. It revealed that it also made a profit of around NT$10 million from the rising NT dollar in June.

Hon Hai Precision, which issued US$345 million worth of ECBs at an exchange rate of NT$32.15 two years ago, said that it’s not seriously affected by the rising local currency since it had taken several measures to hedge the risks associated with exchange rate fluctuations.