HSBC has been at the forefront of both developed and emerging fx market over the last year, particularly through driving the development and growth of the offshore renminbi market. It was behind the first CNH spot transaction and the first CNH option as well as getting more esoteric with the first structured note linked to CNH. These were the key factors in the firm landing the 2012 FX Derivatives House Of The Year award from the editors of Derivatives Week/Derivatives Intelligence.
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HSBC has served retail, private and large financial end users. “A lot of companies in Hong Kong and Taiwan have factories in China and, for that reason, they need to hedge Renminbi exposure,” said Vincent Craignou, global head of fx and precious metals derivatives at HSBC in London. Due to the increasingly volatile RMB environment, illustrated by the recent move by the People’s Bank of China to double the width of the daily trading band for U.S. dollar/CNY, HSBC has tailored hedges. A key offering is a structured forward with an airbag, or knock-in, feature which acts as a buffer against RMB depreciation.
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“There are many companies who still have factories in China or payables they need to make in RMB, so they still have a need to purchase this currency. But with the slightly increased volatility they would like to perhaps have a hedging product which gives them a bit more of a buffer against mild fluctuations or periodic fluctuations of the currency,” said Selene Chong, global head of fx and precious metals structuring in Hong Kong. HSBC offered this hedge in both the U.S. dollar against CNH and sterling/CNH. “The reason this is important is because RMB is being used more and more as a trade currency, so increasingly clients will have a requirement to purchase RMB to settle their trade with a Chinese partner, but not every corporate has a U.S. denominated balance sheet,” said Chong.
The firm has also stood out for bolstering the operational side of its business. “A lot of changes needed to be made to our settlement systems so we could automatically handle the settlement of renminbi both for CNH and CNY transactions,” said Craignou.