BEIJING, Oct 12 (Reuters) - China's biggest state firms must highlight that "cash is king" in their 2010 budgets and control trading in financial derivatives, China's state asset watchdog said.
The State-owned Asset Supervision and Administration Commission (SASAC) gave few details about its plans for derivative losses made by China's state firms [ID:nSP69447].
But SASAC said in a notice issued over the weekend that it did not want state firms to speculate in derivatives in 2010.
"Any budget for financial derivatives should stick to the principal of risk hedging, and any trading scale must be in line with spot market budget and risk affordability," it said.
China's state firms should stick to prudent financial policies and be prepared for "tough days" in 2010 because of uncertainties at home and abroad, SASAC said.
SASAC has put pressure on state firms after several, including Air China (601111.SS: Quote, Profile, Research) (0753.HK: Quote, Profile, Research) and China Eastern (600115.SS: Quote, Profile, Research), reported huge derivatives losses as the global financial crisis intensified.
It also rattled foreign banks by saying companies within its stable could launch lawsuits over losses on over-the-counter derivative trades.
For scenarios about how the dispute may play out, please click on [ID:nSP96058]; for a Q&A on the situation, please click on [ID:nSP415840]. For more, click [ID:nSP486856]
SASAC was set up in 2003 to oversee the biggest non-bank state-owned enterprises, usually parent companies of the largest listed firms such as PetroChina (0857.HK: Quote, Profile, Research) (601857.SS: Quote, Profile, Research) (PTR.N: Quote, Profile, Research), Sinopec (0386.HK: Quote, Profile, Research) (SNP.N: Quote, Profile, Research) (600028.SS: Quote, Profile, Research), Chalco (2600.HK: Quote, Profile, Research) (601600.SS: Quote, Profile, Research) and China Mobile (0941.HK: Quote, Profile, Research) (CHL.N: Quote, Profile, Research). (Reporting by Zhou Xin and Tom Miles; Editing by Ken Wills)
