Taiwan Cement Corp., Taiwan's largest cement maker with total assets over TWD98 billion (USD2.8 billion), is considering entering interest rate swaps in anticipation of rate increases next year. "We want to take advantage of low rates in case they go up sharply," said S.C. Hwang, specialist in the finance department in Taipei. He noted that the company could hedge up to 40% of its TWD20 billion outstanding floating-rate debt via five-year interest rate swaps by the second quarter of next year. It is now looking at such transactions because it believes the interest rate cycle is now pointing to higher rates. "They've reached the bottom," he continued.
The company previously has used interest rate swaps and fx forwards as hedging tools. In addition, Taiwan Cement's finance department is also studying the possibility of purchasing fx options but first needs board approval, which may happen next year, noted Hwang. "This would help with currency fluctuations," he said.
For derivative transactions, Taiwan Cement speaks to several houses including ABN AMRO, Citigroup and HSBC. The company selects counterparties based on factors such as relationships and size of credit lines.
