Bank of China International, the investment banking unit of mainland banking giant Bank of China, is looking to expand its newly established equity derivatives business in Hong Kong to encompass credit derivatives and convertible bond arbitrage by the summer. BOC International recently set up an equity derivatives operation in Hong Kong led by Warren Kwan, who joined from Deutsche Bank (DW, 2/4). Although Kwan was hired to set up the equity derivatives operation he will also be responsible for hiring for the credit derivatives effort, he noted.
BOC International's new credit derivatives operation will focus on convertible bond underwriting and arbitrage, via selling asset swaps, but will also structure credit-linked notes as well as trade credit-default swaps for its customers. "Credit derivatives will be used to facilitate customer requests and complement our convertible bond underwriting," said Kwan. For credit-default swaps, the bank will concentrate on client flows rather than trade in the interbank market for its own book as the group will concentrate on the convertible bond market.
"An extra player or two won't hurt," noted a credit derivatives head in Hong Kong, adding that while BOC International could aid liquidity, there won't be a massive increase in credit-default swap trading activity until there are a greater number of bond issuances in Asia. "There's not enough raw material," he added.
