Three Factors Restrict Corporate Insurance

Core tip: banks' support for hedging is low.

Around the futures market serving the national economy, Hubei securities regulatory bureau has organized three large-scale research activities since 2009, and summed up the three major problems that restrict the participation of agricultural enterprises in the futures market.

Guangming said that he was impressed by an agricultural enterprise in the survey.

"This rice company is optimistic about its timing, and wants to maintain its value through Zhengzhou early indica rice futures, but because its own funds are insufficient, bank credit does not support them, so that they miss the opportunity to preserve their value."

Guangming said that in developed countries, if the enterprises applying for credit are not involved in the futures market, it is difficult to assess the credit funds through the bank.

In China, the opposite is true. Some commercial banks are reluctant to give loans to enterprises that use the futures market hedging, even if they offer loans.

It is a very practical problem that hedging objects are not compatible with accounting treatment.

Guangming said that the current accounting standards stipulate that the quantitative standard of hedging is 80%-125%. However, due to the strong seasonal fluctuation of agricultural products, enterprises tend to surpass the quantitative standards stipulated by the rules in the process of hedging, accounting firms will attribute this behavior to an accounting method that is not suitable for maintaining value, and the resulting profit and loss will be classified as non recurring gains and losses, which will increase the profit margin of corporate financial statements.

"In the survey, some enterprises with strong listing intention are afraid to undertake Hedging under such circumstances."

In addition, the merger and loss of state-owned enterprises' hedging and spot profits and losses is also a major problem.

Guangming said that the evaluation system of state-owned enterprises was not perfect enough to let them participate in the futures market.

"Some enterprises have shown that hedging enables us to make profits in the futures market when the spot market is losing money, and spot losses in the future market profits, which is the charm of the hedging of spot risks in the futures market.

However, because the evaluation system of enterprises is not perfect, if futures are lost, futures will be profitable. If the stock market has made the futures deficit, not only the leaders of the unit will not understand, but also will not be able to explain to the superiors. "