Cebu exporters, importers still not keen on hedging

CEBU, Philippines - The volatility and uncertainties in the foreign exchange market requires both exporters and importers to know hedging strategies to protect their investments.

However, Carlos Co, president of Cebu Oversea Hardware, said most importers are not taking advantage of banks’ hedging facilities because the value of the peso is now relatively stable.

He told The Freeman that hedging the value of the dollar does not work for importers and exporters all the time.

“Hedging works both ways. If an importer avails of the hedging facility of banks and then the value of the dollar weakens, he may lose,” Co said.

One hedging facility offered by banks is to allow their debtors to pay their debt three months from now at the current value of the dollar at a certain interest. This will protect the debtors from the increase in the value of the dollar against the peso.

Hedging is an investment tool used by investors to insure against the declining value of the peso against the dollar. A hedge is a position established in one market in an attempt to offset exposure to price fluctuations with the goal of minimizing one’s exposure to unwanted risk.

Security Bank Corp., through its Hedging and Financial Solutions Division, recently conducted a seminar on hedging strategies for importers in Cebu as part of the bank’s series of events aimed at providing customized solutions and services that help clients manage the volatility and uncertainties inherent in the foreign exchange market.

A press statement said the seminar was designed to provide both current and prospective clients with the basic knowledge, methods and strategies about hedging as well as the foreign exchange forecasts.

Jennifer Cruz, general manager of 33 Point 3 Exports Inc. said hedging is applicable only to bigger exporters as this will mean additional costs to small and medium exporters, whose export orders are not stable with export market still “soft.”

“It still depends on the size of the exporter. Most SMEs have less profit. If they pay the banks interest or the cost of hedging, (this will mean additional investment,)” he said.

For exporters, hedging would include forward contracts, options and swaps. Exporters will sell their forward shipment to the banks in a fixed foreign exchange rate.

Meanwhile, Security Bank’s Treasury Group and Fixed Income Securities Division is recognized for its expertise and consistency in delivering superior value for its customers and business partners. Security Bank Corporation is considered as one of the best performing Banks, consistently reporting better-than-industry figures in Return on Equity (ROE) and capital adequacy ratio indices that outperform even the bigger banks in the industry.