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Regulator: Report derivatives

CHINA'S state-owned enterprises regulator yesterday reiterated that centrally-administered SOEs should strengthen control of financial derivative transactions, and report quarterly to the regulator.

This move by the State-owned Assets Supervision and Administration Commission was aimed at reinforcing the government's stated intention of effectively banning speculation by some SOEs. In March, the commission required the reports to include changes in holdings of derivatives, capital usage, settlements, profits and losses, and analysis of hedging results and risk exposure, the commission said on its Website.

The report form of financial derivative transactions covered futures and options, forward contracts, swap contracts and combinations of contracts, and should be sent to the commission with the financial reports within 10 working days of the end of each quarter. In order to better execute this measure, the commission designed a new form for SOEs to fill in.

Several central SOEs have reported huge derivatives losses since last year as the global financial crisis spread.

Three air carriers - Air China, Shanghai Airlines and China Eastern - reported a total of 13.17 billion yuan (US$1.94 billion) of book losses as of the end of January on aviation fuel hedging contracts.

CITIC Pacific disclosed in October potential losses may exceed HK$15 billion (US$1.9 billion) from unauthorized hedging by senior financial managers against changes in foreign exchange transactions.


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