Annual Report 2021

169 Notes to the Financial Statements Miramar Hotel and Investment Company, Limited Annual Report 2021 23 Financial risk management and fair values (Continued) (c) Equity price risk The Group is exposed to equity price changes arising from equity investments held for trading and non-trading purposes (see note 13). The Group’s listed investments are listed in Hong Kong and overseas. Decisions to buy or sell trading securities are based on daily monitoring of the performance of individual securities compared to that of the Index and other industry indications, as well as the Group’s liquidity needs. Listed investments that are not held for trading purposes have been chosen taking reference to their long term growth potential and returns and are monitored regularly for performance against expectations. Given that the volatility of the stock markets may not have a direct correlation with the Group’s investment portfolio, it is impractical to determine the impact that the changes in stock market indices would have on the Group’s portfolio of equity investments. At 31 December 2021, it is estimated that an increase/decrease of 5% (2020: 5%) in the market value of the Group’s listed securities, with all other variables held constant, the Group’s profit after tax would have increased/decreased by HK$40,000 (2020: HK$314,000). The Group’s total equity would have increased/decreased by HK$2,032,000 (2020: HK$4,262,000). The sensitivity analysis above indicates the instantaneous change in the Group’s profit after tax (and retained profits) and other components of consolidated equity that would arise assuming that the change in market value had occurred at the end of the reporting period and had been applied to re- measure those financial instruments held by the Group which expose the Group to equity price risk at the end of the reporting period. It is also assumed that the fair values of the Group’s listed investments would change in accordance with the market values, and that all other variables remain constant. The analysis is performed on the same basis for 2020. (d) Foreign currency risk The Group owns assets and conducts its business primarily in Hong Kong and the PRC with its cash flows substantially denominated in Hong Kong dollars and Renminbi. The Group has no significant exposure to foreign currency risk as substantially all the transactions are either denominated in the functional currency of the entity or in United States dollars, where Hong Kong dollars is pegged to United States dollars, the resulting currency risk is considered insignificant.