Certain subsidiaries of the Company have foreign currency
denominated monetary assets, which expose the Group to foreign
currency risk. The Group currently does not have a policy to hedge
the foreign currency exposure. However, the management monitors the
related foreign currency fluctuation closely and will consider
entering into foreign exchange forward contracts to hedge
significant portion of the foreign currency risk should the need
arise.
The carrying amounts of the foreign currency denominated
monetary assets at the end of the reporting period in the
respective group entities are as follows:
2014 2013
HK$'000 HK$'000
Hong Kong dollars 23 23
United States dollars 63,948 70,273
Renminbi 226,682 184,118
======== ========
33. FINANCIAL INSTRUMENTS - continued
(b) Financial risk management objectives and policies - continued
Market risk - continued
(i) Foreign currency risk - continued
The loans for foreign operations within the Group that form part
of the Group's net investment in foreign operations, and are
denominated in foreign currency, other than the functional currency
of the respective foreign entities, the Hong Kong dollars and
United States dollars, at the end of the reporting period amounted
to HK$208,897,000 (2013: HK$208,904,000) and HK$92,441,000 (2013:
HK$92,420,000) respectively.
Sensitivity analysis
The following table details the Group's sensitivity to a 5%
(2013: 5%) appreciation in the functional currencies of the
relevant subsidiaries, (i.e., Renminbi and Hong Kong dollars,
relative to the foreign currencies of the relevant subsidiaries,
(i.e. Hong Kong dollars), United States dollars and Renminbi).
There would be an equal and opposite impact where Renminbi and Hong
Kong dollars weaken 5% (2013: 5%) against the relevant
currencies.
Decrease in
profit for the Increase in
year equity
2014 2013 2014 2013
HK$'000 HK$'000 HK$'000 HK$'000
Hong Kong dollars 1 1 10,445 10,445
United States
dollars 3,197 3,514 4,622 4,621
Renminbi 11,334 9,206 - -
======= ======= ======= =======
In management's opinion, the sensitivity analysis is
unrepresentative of the inherent foreign currency risk as the year
end exposure does not reflect the exposure during the year.
Since the Hong Kong dollar is pegged to the United States dollar
under the Linked Exchange Rate System, management does not expect
any significant foreign currency exposure in relation to the
exchange rate fluctuations between the Hong Kong dollar and the
United States dollar.
33. FINANCIAL INSTRUMENTS - continued
(b) Financial risk management objectives and policies - continued
Market risk - continued
(ii) Interest rate risk
The Group is exposed to cash flow interest rate risk in relation
to variable-rate borrowings, loan receivables, bank balances and
deposits. The directors consider that the interest rate risk on
bank balances and deposits are insignificant as they are subject to
minimal interest rate fluctuation, accordingly, no sensitivity
analysis is presented. The Group's cash flow interest rate risk is
mainly concentrated on the fluctuation of HIBOR and the PBOC
Prescribed Interest Rates on the bank borrowings, and Hong Kong
Prime Rate on the loan receivables.
The Group currently does not have an interest rate swap hedging
policy. However, management monitors the interest exposure and will
consider hedging interest rate risk exposure should the need
arise.
Sensitivity analysis
The sensitivity analysis below has been determined based on the
exposure to interest rates in relation to the Group's variable-rate
bank borrowings and loan receivables at the end of the reporting
period. The analysis is prepared assuming the amount of asset and
liability outstanding at the end of the reporting period was
outstanding for the whole year. A 50 basis points increase or
decrease represents management's assessment of the reasonably
possible change in interest rates.
If interest rates had been 50 basis points higher/lower and all
other variables were held constant, the Group's profit for the year
ended 31 December 2014 would decrease/increase by HK$18,487,000
(2013: HK$15,095,000).
Credit risk
The Group's maximum exposure to credit risk in the event of the
counterparties' failure to perform their obligations at the end of
the reporting period in relation to each class of recognised
financial assets is the carrying amount of those assets as stated
in the consolidated statement of financial position, which is
arising from the carrying amount of the respective recognised
financial assets as stated in the consolidated statement of
financial position; and the amount of contingent liabilities in
relation to the financial guarantees provided by the Group as
disclosed in note 39. In order to minimise the credit risk,
management of the Group has monitoring procedures to ensure that
follow-up action is taken to recover overdue debts. In addition,
the Group reviews the recoverable amount of each individual debt at
the end of each reporting period to ensure that adequate impairment
losses are made for irrecoverable amounts. In this regard, the
directors of the Company consider that the Group's credit risk is
significantly reduced.
At 31 December 2014, the Group has concentration of credit risk
on other receivables from two counterparties. The management of the
Group has periodic communication with the counterparties and has
monitored the progress of the project as set out in note 22,
continuously.
Although the placing of deposits and notes subscribed are
concentrated on certain banks, the credit risk on these financial
assets is limited because the counterparties are licensed
banks.
33. FINANCIAL INSTRUMENTS - continued
(b) Financial risk management objectives and policies - continued
Credit risk - continued
The Group has no other significant concentration of credit risk
with exposure spread over a number of counterparties and
customers.
For properties under development which are held for sales,
subject to pre-sales agreements, the Group generally provides
guarantees to banks in connection with the purchasers' borrowing of
mortgage loans to finance their purchase of the properties.
Pursuant to the guarantees, upon default in mortgage payments by
these property purchasers, the Group is responsible to repay the
outstanding mortgage principals together with the accrued interest
thereon. Under such circumstances, the Group is entitled to retain
the purchasers' deposit and to take over the legal title and
possession of the relevant property. In this regard, the directors
of the Company consider that the Group's credit risk is
significantly reduced.
Liquidity risk
Ultimate responsibility for liquidity risk management rests with
the directors of the Company, which have built an appropriate
liquidity risk management framework for the management of the
Group's short, medium and long-term funding and liquidity
management requirements. The Group manages liquidity risk by
maintaining adequate reserves, banking facilities, and by
continuously monitoring forecast and actual cash flows. As at 31
December 2014, the Group has available unutilised bank loan
facilities of approximately HK$845,000,000 (2013:
HK$855,000,000).
The following table details the Group's remaining contractual
maturity for its financial liabilities based on the agreed
repayment terms. The table has been drawn up based on the
undiscounted cash flows of financial liabilities and on the
earliest date on which the Group can be required to pay. The table
includes both interest, estimated based on interest rate at the end
of the reporting period, and principal cash flows.
Weighted
average 3 months 6 months 9 months Total
effective Within to to to Over undiscounted Carrying
interest 3 months 6 months 9 months 12 1 year cash amount
rate months flows
% HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000
At 31.12.2014
Payables and
rental deposits
received - 157,284 3,707 4,906 27,257 71,151 264,305 264,305
Amounts due
to
non-controlling
interests - 99,505 - - - - 99,505 99,505
Variable rates
bank borrowings 2.9 327,781 77,774 59,562 81,766 3,915,321 4,462,204 4,019,734
Financial
guarantees
liabilities 17,432 - - - - 17,432 -
------------ ------------ ------------ ------------ ------------ ------------ ------------
602,002 81,481 64,468 109,023 3,986,472 4,843,446 4,383,544
======= ======= ======= ======= ======= ======= =======
At 31.12.2013
Payables and
rental deposits
Received - 167,597 8,478 3,743 3,364 87,302 270,484 270,484
Amounts due
to
non-controlling
interests - 96,985 - - - - 96,985 96,985
Variable rates
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