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33. Financial risk management objectives and policies (cont’d)
(c)
Interest rate risk (cont’d)
Sensitivity analysis
At the end of the reporting period, if interest rates had been 100 (2014: 100) basis points lower/higher with all other variables held
constant, the Group’s profit would have been $108,000 (2014: $155,040) lower/higher, arising mainly as a result of lower/higher interest
income/expense on floating rate bank loans and bank balances. The assumed movement in basis points for interest rate sensitivity
analysis is based on the currently observable market environment, showing a significantly higher volatility as in prior years.
(d)
Foreign currency risk
The Group has transactional currency exposures arising from purchases that are denominated in a currency other than the functional
currency, SGD. The foreign currencies in which these transactions are denominated are mainly Thai Baht (“THB”) and Malaysian Ringgit
(“MYR”). Approximately 23% (2014: 24%) of the Group’s purchases are denominated in foreign currencies.
The Group does not have a formal hedging policy with respect to foreign currency exposure. Exposure to foreign currency risk is
monitored on an on-going basis and management seeks to keep the net exposure to an acceptable level.
Sensitivity analysis
The following table demonstrates the sensitivity to a reasonably possible change in the THB and MYR exchange rate (against SGD), with
all other variables held constant, of the Group’s profit before tax.
The Group
2015
2014
$’000
$’000
Thai Baht
- strengthened 5% (2014: 5%)
(22)
(23)
- weakened 5% (2014: 5%)
22
23
Malaysian Ringgit
- strengthened 5% (2014: 5%)
40
70
- weakened 5% (2014: 5%)
(40)
(70)
