(Adds denial from ISDA official in fourth paragraph)
By Tom Miles
BEIJING Aug 29 Chinese state-owned enterprises
(SOEs) may unilaterally terminate derivative contracts with six
foreign banks that provide over-the-counter commodity hedging
services, a leading financial magazine said.
China's SOE regulator, the State-owned Assets Supervision
and Administration Commission (SASAC), has told the financial
institutions that SOEs reserved the right to default on
contracts, Caijing magazine quoted an unnamed industry source as
It did not name the banks or the firms in question but cited
a SASAC official as saying that almost every SOE involved in
foreign exchange or trade had some exposure to derivatives such
as crude oil, non-ferrous metals, agricultural commodities, iron
ore and coal, although only 31 SOEs were licensed to do so.
Nobody at SASAC was immediately available to comment on
Caijing said Keith Noyes, regional director, Asia Pacific,
at the International Swaps and Derivatives Association, had
confirmed he was aware of the letter. But he told Reuters on
Saturday that he had been over-quoted by Caijing and had not
seen any letter, although he was aware of such rumours.
SASAC took over the job of overseeing SOEs' derivatives
trading from the securities regulator in February after several
Chinese firms reported huge losses from derivatives.
It quickly tightened the rules, ordering firms to quit risky
contracts and report their positions on a quarterly basis.
In January, Air China (601111.SS) (0753.HK), Shanghai
Airlines 600591.SS and China Eastern (600115.SS) reported book
losses of almost $2 billion on aviation fuel hedging contracts,
the official Xinhua news agency said at the time.
For more details on China's derivatives regulation, please
click on: [ID:nPEK207347]
For a history of China's derivative debacles: [ID:nPEK206094]
(Editing by Mike Peacock)