(Yicai Global) Sept. 3 -- Chinese auto parts maker Chongqing Qin’an M&E, which logged a loss in the first quarter, has made more than CNY700 million (USD102.4 million) through futures’ investments since May.

Qin'an earned CNY13.4 million (USD1.9 million) on the expiration of some of its futures contracts between Aug. 25 and Aug. 31, accounting for 11 percent of its net profit in 2019, the Chongqing-based firm said yesterday. This is the company’s 18th such sale since May 20 and it has gained each time.

The returns from its futures investments have enabled Qin’an to turn a profit. It reported a net loss of CNY18.8 million (USD2.75 million) in the first quarter from the same period last year. But posted net profit of CNY251 million in the first half on earnings of CNY254 million from its futures trading, according to the firm’s latest earnings report.

On May 20, the company invested CNY500 million (USD73 million) of its own funds in futures and raw materials hedging to lower the cost of raw materials such as aluminum and gold and to avoid risk from price fluctuations. The firm has since increased this to CNY900 million as its gamble turned out well.

Chairman Tang Yuanming’s talent for recognizing a good deal have led to some investors suggesting the name of the firm be changed to Qin'an Financial Holdings. Other investors, however, are concerned that the auto parts maker is running an " irrelevant business."

“Hedging is a great risk management method, but it will become speculation if the commodities do not equal the futures’ prices," an industry insider told Yicai Global. And speculation is a taboo in this field, he added.

The prices of aluminum and gold, the firm’s main picks, have been on the rise since May, rising more than 10 percent and 5 percent respectively on the Shanghai Futures Exchange.

Qin'an’s huge returns from futures trading are reasonable, another industry insider told Yicai Global. The sharp drop in commodity prices after the Covid-19 outbreak has offered the firm an opportunity to buy low-priced raw materials, greatly boosting its performance.

The firm has only engaged in futures trading due to special circumstances, the firm said in its earnings report. The company will gradually withdraw from the futures market although it will continue to keep an eye on hedging with futures, it added.

Qin’an Holdings’ stock price [SHA:603758] closed down 5.19 percent today at CNY11.68 (USD1.71). Its stock price has doubled since it announced its foray into futures trading on May 20.

Editors: Tang Shihua, Kim Taylor