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Derivatives

Barclays, Goldman Prep Korean I-Rate Desks

Barclays Capital and Goldman Sachs are separately planning to set up onshore interest-rate derivatives desks in Korea in the coming months, according to officials at both firms.

"Korea is a market where although there are a lot of firms, there are good opportunities for banks with strong balance sheets," said Guillermo Cabeza, director of emerging markets at Barclays in Singapore. "The desk should be running by the end of the month," he continued, noting that the initiative is piggybacking on the back of a branch opening.

A trader at Goldman confirmed it is setting up a desk within the next few months, but declined further comment. Peter Rose, spokesman in Hong Kong, did not return repeated calls.

Barclays' plan to move onshore has been in the works for over a year, noted Cabeza, adding that both internal and external approvals were required. "We'll initially transfer a couple of traders," he said, adding that it already has a local sales and structuring team of six in place and will also looking to hire four additional traders this year. From the onset, the desk will trade interest-rate swaps as well as structured notes. "The market is becoming more open every year and right now the country is seeing strong inflows in equity investments from foreigners. I expect the same eventually for fixed-income investments," he added. Cabeza also noted that the firm has been trading offshore in the won market for over six months, adding that in moving onshore, "we expect a dramatic increase in volumes with clients."

"This is very positive," said an official at Citibank in Seoul, noting that it will boost liquidity and bring additional counterparties to the KRW100-200 billion (USD76-152 million) per day market. In recent months Société Générale (DW, 9/23/01) and domestic houses Shinhan Bank and Koram Bank (DW, 8/14/01) have set up desks to join the large number of U.S. and European houses already there.

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