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Asia-Pacific

Asia PacificRisk Management Limited provides tailored advice on financial risk, hedging solutions and corporate treasury management to the following organisations in New Zealand, Australia and Asia:

  • Public-listed, state-owned and privately owned companies that have financial risk exposures arising from their business activities:-
    • Importers
    • Exporters
    • Borrowers
    • Commodity buyers/sellers
  • Finance companies and building societies that have financial risk exposures on liquidity, funding and interest rate movements.
  • Fixed Interest Investment funds/portfolios or organisations who themselves invest directly into approved debt securities.
  • Government and Regional/Local Government bodies on debt raising/refinancing and interest rate risk management on debt and invested funds.

Asia-Pacific Risk Management Limited conducts its retained and one-off advisory assignment under formalised engagement/mandate letters with its clients that detail:-

  • Scope, objectives and deliverables of the advisory project and retained relationship
  • Timetable and assigned staff
  • Advisory Fees - fixed amounts with agreed payment dates
  • Confidentiality undertakings from both parties.
Fonterra's FX hedging performance

Being New Zealand’s largest exporter there is naturally much interest in Fonterra’s foreign exchange hedging position and performance, particularly from their dairy farming suppliers/shareholders. The chart above plots their published annual average “achieved” NZD/USD conversion rates for each year. Up until early 2006 the company operated a 15-month forward, 100% rolling hedge policy. As could be expected, the average achieved rates under this regime were delayed spot, less the forward points. Since 2006 Fonterra have moved to a shorter and more flexible hedging horizon. Their average achieved rate for the 12 months ending July 2008 was 0.7400, so the shorter-term hedging in 2006 and 2007 was ineffective against the relentlessly rising NZD value. Fonterra appears to be only carrying a 6-month maximum forward hedge book in recent times, thus they are well placed to pass-through the benefits of the massive NZD depreciation into the milksolids payout in the second half of 2009. The big question is whether Fonterra is now seriously lengthening their hedging horizon to secure the 0.5000 exchange rate for coming years?

DISCLAIMER: The information contained in this document is given in good faith and has been derived from sources believed to be reliable and accurate. However, neither Asia-Pacific Risk Management Limited nor any of its employees, gives any warranty of reliability of accuracy nor accepts any responsibility arising in any other way (including by reason of negligence) for errors or omissions herein.