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Notes to the financial statements
31 December 2014
Bursa Malaysia
•
Annual Report 2014
158
36. Financial risk management objectives and policies (cont’d.)
(a) Market risk: Equity price risk
Equity price risk is the risk that the value of an equity instrument will fluctuate as a result of changes in market prices. The Group and the Company are
exposed to equity price risk through the Company’s holding of shares in CME Group. The shares were obtained as part of the purchase consideration in the
strategic alliance forged with CME Group.
The Group and the Company monitor the value of the equity holding by considering the movements in the quoted price, the potential future value to the
Group and the sell down restrictions surrounding the equity holding.
An increase/decrease of 1% (2013: 1%) in the quoted price of the instrument would result in an increase/decrease in equity of RM1,186,000
(2013: RM986,000).
(b) Market risk: Interest rate risk
Interest rate risk is the risk that the value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The
Group and the Company are exposed to interest rate risk through the holding of unquoted bonds, commercial papers and deposits with licensed financial
institutions.
The Group and the Company manage interest rate risk by investing in varied asset classes.
Interest rate risk sensitivity
The following table demonstrates the sensitivity of the Group and of the Company’s profit after tax and equity to a 25 basis points (2013: 25 basis points)
increase/decrease in interest rates with all other variables held constant:
Group
Company
2014
2013
2014
2013
RM’000
RM’000
RM’000
RM’000
Effects on profit after tax if:
- increase by 25 basis points
546
713
105
271
- decrease by 25 basis points
(564)
(713)
(105)
(271)
Effects on equity if:
- increase by 25 basis points
(37)
(86)
(163)
(43)
- decrease by 25 basis points
37
86
163
43
The sensitivity is the effect of the assumed changes in interest rates on:
• the net interest income for the year, based on the financial assets held at the end of the financial year; and
• changes in fair value of investment securities for the year, based on revaluing fixed rate financial assets at the end of the financial year.