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Asia Polls and Awards

Asiamoney FX Poll 2015: Opportunities amid the volatility

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The year 2015 has been one of immense volatility for foreign exchange in the Asia Pacific region, amid capital flight from emerging markets. In such turbulence, only service providers with top-class expertise and experience can help clients to not only preserve but enhance their commercial strength. Anthony Chan reports.

This year’s Asiamoney FX Poll was dominated by ANZ and CIMB, which won the Best for Overall FX Services categories for corporates and financial institutions, respectively. Both have been regulars among the top ranks of Asiamoney polls and they continue to demonstrate that they are on top of their game in the regional FX sector. Both banks also topped the ranks for their domestic markets.

As in previous years, the poll was divided into a corporates questionnaire and a financial institutions (FIs) questionnaire. Banks, central banks, institutional investors, insurance firms and brokers participated in the latter.

ANZ has long proved to be a very strong competitor across many asset classes in the region. And the Australian bank is certainly no stranger to Asia’s corporates and FIs.

“ANZ’s long-term AA credit rating, coupled with our strong onshore presence across 29 different markets in Asia Pacific and a team of experts that understands the unique market characteristics of this heterogeneous region, allows us to offer an unrivalled service and advice to our clients," says Eddie Listorti, co-global head of fixed income, currencies and commodities at ANZ.

"The footprint we’ve established in Asia is a reflection of our super-regional strategy, which in FX means we are focused on being a major player in Asian currencies, while leveraging the long standing expertise we have in our home markets of Australia and New Zealand. We offer an extensive suite of FX solutions encompassing G10, where we are historically strong in AUD and NZD due to our unrivalled corporate franchise."

A strong focus on emerging Asian currencies also helps the bank. ANZ is a market maker in the full range of Asian Non Deliverable Forwards and Deliverable Currencies, allowing for simultaneous FX hedging/hedge unwinding alongside restricted currency purchases and sales. This is supported by 24 hour market access through trading desks in London, New York, Hong Kong, Singapore, Tokyo, Sydney, Melbourne and Wellington.

Topping the votes from FIs was CIMB, a firm that claims the widest footprint in the Asean region. "In foreign exchange, we have expanded our trading and sales capabilities significantly in the last three years," says Thomas Tan, global head of treasury sales and FX at CIMB. "Today we have a 200-strong team serving our clients in Asean, and we believe we have one of the largest teams among regional banks operating here."

Tan notes that the bank's focus has always been on building up its local currency capabilities, whether in FX spot, FX swaps, FX options or local currency interest rate swaps.

"Today we can offer cross currency swaps for up to 30 years in Malaysian ringgit, 15 years in Indonesian rupiah, 20 years in Singapore dollars and 20 years in Thai baht," he says. "International bank counterparties like to deal with us because we can provide them with depth and liquidity in the currency markets, and they view us as neutral because we don't compete with them in their home markets. It's a nice niche to be in."

Good year for CrédAg

Back office platforms, pricing and customer relationship services were all considered top priorities among corporate clients and FIs when selecting service providers. A seamless trading platform is something Crédit Agricole has invested in — and the effort has paid off. While not the very top ranked firm, the Paris-based bank performed admirably in this year's poll of financial institutions.

“To reinforce the emerging markets pricing platform and improve information sharing between sales and our clients, we consolidated our EM FX and Rates trading platform in Hong Kong last year," notes Steve Nutland, regional head of sales for global markets at Crédit Agricole CIB in Asia. "The end result is a more robust and dynamic EM trading team in Hong Kong, with an enhanced co-operation with the sales team, and more colour for the end-clients." 

The bank also has a number of specific initiatives for FIs that either focus on a specific client segment, such as regional banks and local hedge funds, or across product segments, such as e-dealing for EM currencies or a CNH related product suite.

“The FX product line, along with its partners in the Sales and Research teams and the Financial Institutions Group, has committed to becoming more relevant to its key clients and the FX market place," adds Dmitri Shuster, Crédit Agricole's London-based global head of foreign exchange. "Our trading team is strongly committed to FX flow business with FIs in Japan, Korea, Taiwan, Singapore, Hong Kong and other countries of the region.”

The bank plans to further the use of its global franchise to deliver liquidity and solutions to local FIs. The firm is already active across USDCNH spot, swap, rates and options, as well as dim sum bonds, but it will continue to invest in CNH products. Also notable is a strong presence in KRW and TWD products.

Volatile future

The near future can be summed up in one word: volatility. There are more market uncertainties that will put pressure on local firms both financial institutions and corporates: the Fed’s rate decision and future trajectory; China stocks and the RMB internationalisation process; and a commodity meltdown amid an Asia slowdown.

As with all crisis periods, there will be opportunities and service providers that are flexible, forward-looking and able to anticipate rapid market changes will be well positioned to offer the most optimal solutions to clients during such volatility.

They will take heart from the fact that despite the rough seas ahead, the region’s economies have much better fundamentals than they did back in 2008 and 1997, the times of previous crises. These days Asian governments and central banks have a wider arsenal of policy tools and most currencies in the region have matured and afloat with current account surpluses. So far, Asian EM currencies have performed relatively well compared to the Brazilian real or Russian rouble, for example.

Furthermore, the economic engine of the region, China, is restructuring its economy at a fairly rapid pace, with services now exceeding manufacturing as a share of GDP while employment remains strong. Beijing’s surprise currency devaluation in August was misinterpreted by some as a rescue attempt for its stock market decline, when in fact it was another effort to liberalise the RMB, partly in response to the wishes of the International Monetary Fund, whose Special Drawing Rights facility China would like to see the renminbi join in the IMF's next review later this year.

“We think that recent volatility in the RMB is partly a result of its transition to a more market driven currency,” adds ANZ's Listorti.

The spotlight is on China and its currency. At almost $5tr per year, intra-Asia trade flows are more than four times those of Asia-Europe or Asia-US. There is immense value for service providers to be strong in FX, and in particular RMB offerings, in this region. The growth of the RMB internationally as a settlement currency — with a strong trend in liberalisation of currency restrictions — means that the RMB will lead the growth of Asian currencies.

Elsewhere, developments in India, Vietnam and Philippines and their currencies also present opportunities. These economies have strong domestic dynamics and overseas remittances that will continue to drive FX demands. 

Sep15 FX poll 1

 

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