BUILDING LANDMARKS, CHARTING GROWTH
243
Annual Report 2015
NOTES TO THE FINANCIAL STATEMENTS
26 FINANCIAL INSTRUMENTS
(continued)
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will
affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is
to manage and control market risk exposures within acceptable parameters, while optimising the return.
When necessary, the Group uses financial instruments such as foreign currency borrowings for the purposes of managing
certain financial risks and does not engage in speculation.
Currency risk
Risk management policy
The Group is exposed to foreign currency risk mainly arising from sales, purchases and borrowings that are denominated
in a currency other than the respective functional currencies of Group entities. The currencies giving rise to this risk include
Chinese Renminbi (“RMB”) and United States Dollar (“USD”).
The Group management monitors the Group’s currency risk exposure and does not hedge foreign currency exposure.
The Group’s exposure to foreign currency risk is as follows:
USD
RMB
$’000
$’000
Group
31/12/2015
Cash and cash equivalents
4,905
1,088
Trade and other receivables
4,396
905
Trade and other payables
(14,093)
(56,321)
(4,792)
(54,328)
The Group and the Company are not exposed to significant currency risk exposure in the previous year.
Sensitivity analysis
A reasonable possible strengthening (weakening) of the above currencies against the respective functional currencies of
Group entities at the reporting date would have increased (decreased) the profit or loss (before any tax effects) by the
amounts shown below. This analysis is based on foreign currency exchange rate variances that the Group considered to
be reasonably possible at the end of the reporting period. The analysis assumes that all other variables, in particular
interest rates, remain constant.
