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Derivatives

HSBC Plans Taiwan I-Rate Product Expansion

HSBC plans to expand its interest-rate product range in Taiwan next year to include caps, floors and options as uncertainty grows on the direction of interest-rate moves, according to a senior official in Taipei. "This year the interest-rate trend was obvious, next year it won't be a one-way market," he added. The derivatives will be offered in both Taiwan and U.S. dollars and available within three months.

Counterparties for the new products are likely to include airline and manufacturing companies, which have large loan portfolios and would use the products to manage their liabilities. "We have to provide a greater range of financial products as customers become more mature and have a better understanding of complex products," added the official. He continued that the bank is looking to hire an additional trader for the effort.

An official at Citibank estimated that less than 10 interest-rate exotic deals have been executed in the entire Taiwanese market because of the difficulty in hedging the products and the one-way nature of the market. He expects volumes to more than double next year due to the uncertainty of the interest-rate cycle.

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