BEIJING Aug 29 Chinese state-owned enterprises
(SOEs) may unilaterally terminate derivative contracts with six
foreign banks that provide over-the-counter commodity hedging
services, a leading financial magazine said.
China's SOE regulator, the State-owned Assets Supervision
and Administration Commission (SASAC), had told the financial
institutions that SOEs reserved the right to default on
contracts, Caijing magazine quoted an unnamed industry source
It did not name the banks or the firms in question, but
said Keith Noyes, an official with the International Swaps and
Derivatives Association, had confirmed he was aware of the
letter to the banks. He declined to comment further to Caijing.
It also cited a SASAC official as saying that almost every
SOE involved in foreign exchange or trade had some exposure to
derivatives such as crude oil, non-ferrous metals, agricultural
commodities, iron ore and coal, although only 31 SOEs were
licensed to do so.
Nobody at SASAC was immediately available to comment on
SASAC took over the job of overseeing SOEs' derivatives
trading from the securities regulator in February after several
Chinese firms reported huge losses from derivatives, and
quickly tightened the rules, ordering firms to quit risky
contracts and report their positions on a quarterly basis.
In January, Air China (601111.SS) (0753.HK), Shanghai
Airlines 600591.SS and China Eastern (600115.SS) reported
book losses of almost $2 billion on aviation fuel hedging
contracts, the official Xinhua news agency said at the time.
For more details on China's derivatives regulation, please
click on: [ID:nPEK207347]
For a history of China's derivative debacles:
(Editing by Sanjeev Miglani)