VERY VERY VERY URGENT

China Petroleum & Chemical Corporation (Sinopec) of China, which ranked the 2 nd largest MNE by revenues in US dollars ($) by Fortune Global 500 for the fiscal year ended 31 March 2020, is a listed company on domestic and international stock exchanges, with integrated upstream, midstream and downstream operations, strong oil & petrochemical core businesses and a complete marketing network.

Due to the recent coronavirus pandemic that swept across China and other countries, Sinopec is concerned with all its future international transactions, especially to Paris, France and London, U.K., which in aggregate contribute nearly 80% to Sinopecs revenues. The MNEs exposure to other foreign markets is minimal. Sinopecs cash flows from/to these two major foreign markets that due soon are:

Currency Total Inflow Total Outflow Current Exchange Rate

Euro () 40m 25m 8.0000/

British pound () 32m 16m 0.1150/

As the Director of International Business Development of Sinopec, you observe that the movements of Euro and British pound are highly correlated in the past given their geographical distances and the same will be expected moving forward.

(i) Discuss on the degree of transaction exposure of Sinopec with these two countries at the current rate if Sinopec decides to adopt natural hedge. What if the Yuan () is expected to appreciate in near future? [Hint: Support your answer with figures] (10 marks)

(ii) Recommend THREE (3) alternative hedging approaches that Sinopec may consider to manage its transaction exposure. (6 marks)