NOTES TO THE FINANCIAL STATEMENTS
31 December 2014
35. Financial risk management objectives and policies (cont’d)
(c) Market price risk
Market price risk is the risk that the fair value or future cash flows of the Group’s financial instruments will fluctuate
because of changes in market prices (other than interest or exchange rates). The Group has investment in quoted
securities investment which is exposed to equity price risk. These investment are classified as fair value through profit
or loss and available-for-sale financial assets. The Group does not have exposure to commodity price risk.
The Group’s objective is to manage investment returns and equity price risk using a mix of investment grade shares with
steady dividend yield and non-investment grade shares with higher volatility.
Sensitivity analysis for equity price risk
At the end of the reporting period, if the underlying quoted securities prices had been 1% (2013: 1%) higher/lower with
all other variables held constant, the Group’s profit before taxation would have been S$27,000 (2013: S$30,000) higher/
lower, arising as a result of higher/lower fair value gains on quoted investment securities classified as fair value through
profit or loss and the Group’s other comprehensive income would have been S$13,000 (2013: S$10,000) higher/lower,
arising as a result of an increase/decrease in the fair value of quoted investment securities classified as available-for-
sale.
(d) Liquidity risk
Liquidity risk is the risk that the Group or the Company will encounter difficulty in meeting financial obligations due to
shortage of funds. The Group’s and the Company’s exposure to liquidity risk arises primarily from mismatches of the
maturities of financial assets and liabilities. The Group’s and the Company’s objective is to maintain a balance between
continuity of funding and flexibility through the use of stand-by credit facilities.
To manage liquidity risk, the Group monitors and maintains a level of cash and cash equivalents deemed adequate by
management to finance the Group’s and the Company’s operations and mitigate the effect of fluctuations in cash flows.
Hock Lian Seng Holdings Limited
Annual report 2014
89
