CORPORATE China’s hedging activities spiked to a new high, according to consultancy data, as the cost of raw materials soared and as China’s financial regulators urged local businesses to cope with higher market volatility.

The number of China-listed non-financial firms using hedging tools such as futures and options to limit market risks rose to 793 at the end of the third quarter, up 51.6 percent from one year ago, public data gleaned by risk-management consultancy D-Union show.

Still, they account for just 18 percent of China’s nearly 4,500 publicly traded companies. In the United States, roughly 80 percent of companies on the benchmark S&P 500 stock index regularly engage in hedging activities.

China’s factory gate inflation in the third quarter rose to a record on soaring commodity prices due to output curbs caused by a power crunch at home amid increased demand for coal and metals as world economies reopened following easing of COVID-19 restrictions.

Chemicals, electronics, mechanical equipment and non-ferrous metals are the industries most heavily engaged in hedging practices, the data showed. Those sectors are also most vulnerable to volatility in resource prices.

Also, as the central bank gradually loosens its reins on the yuan, China’s financial regulators have been stressing the importance of being “risk-neutral” in the foreign exchange market and convincing local businesses to hedge.

The number of foreign exchange-related hedging activities by listed non-financial firms rose to 1,063 as of the end of the third quarter from 862 at end-2020.

(SD-Agencies)