Firms in Asia this year have put together independent hybrid structuring desks, responding to appetite among regional investors for higher-yielding sophisticated investments. One market official said investors in the region are becoming more comfortable with cross-asset exposures.
HSBC is also in the process of developing a group out from its rates desk. Phileas Wong, head of hybrids structuring in Hong Kong, said, "We are seeing constant demand on both rates and foreign exchange." His colleague, Bobby Gerjarusak, head of interest-rate structuring in Hong Kong, added that a weak U.S. dollar had driven demand in 2006 and noted that HSBC had already done many large trades in Asia. Wong said, "Underlying [end-user] demand is the main driver for this business." The advantage of having a hybrids desk is that it is more efficient, products can be put out more quickly and can reach a wider audience, he explained.
Among the other firms, AIG Financial Products was working on a cross-product derivatives desk in Hong Kong (DW, 3/17), and Citigroup was setting up a Hong Kong regional hybrid trading desk (DW, 3/24).
A senior equity official in Hong Kong noted that retail investors have been seeking to use a greater number of underlyings in their investments. He noted that equity derivatives are currently less popular as investors look increasingly to indices, commodities, fund of funds and hedge funds, among others. The reason for this is twofold, investors are diversifying, but also because investors have been losing confidence in Asian equity markets.
