Annual Report 2020

NOTESTOTHE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2020 130 The United Laboratories International Holdings Limited Annual Report 2020 39. FINANCIAL INSTRUMENTS (Continued) Financial risk management objectives and policies (Continued) Market risk (Continued) Foreign currency risk (Continued) Foreign currency sensitivity analysis The following table details the Group’s sensitivity to a 5% (2019: 5%) increase and decrease in RMB against the relevant foreign currencies. 5% is the sensitivity rate used which represents management’s assessment of the reasonably possible change in foreign currency exchange rate. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the end of the reporting period for a 5% change in foreign currency rates. A positive (negative) number below indicates an increase (decrease) in post-tax profit for both years where RMB strengthens 5% against the relevant foreign currencies. For a 5% weakening of RMB against the relevant foreign currencies, there would be an equal and opposite impact on the profit for both years. 2020 2019 RMB’000 RMB’000 USD (40,123) 28,909 Euro 9,795 26,634 HK$ 67,585 43,655 The Group had entered into a foreign currency swap contract with the bank to reduce its exposure to foreign currency risk of its bank borrowings denominated in foreign currencies. The derivatives were not accounted for under hedge accounting. The Group measures the foreign currency swap contract at fair value at the end of the reporting period, and therefore exposed the Group to foreign currency risk. No sensitivity analysis on the foreign currency swap contract has been presented since the management of the Group determined the exposure related to the foreign currency swap contract would be minimal as the exchange rate of HKD is pegged to USD.