Tag: Currency hedging

With FX volumes in Asia-Pacific (Apac) growing rapidly on the back of heightened volatility, HSBC is leveraging its regional and international footprint to broaden its FX offering, providing clients with robust solutions to meet their trading and hedging needs

As worldwide trade disruptions have led to market volatility and uncertainty in Apac, market participants in the region are assessing the risks to their operations and exploring options. As one of the premier FX banks in the world, with a long-standing presence in the Apac region, HSBC is front and centre in the drive to support its clients in navigating this uncertainty and understanding how the current environment is impacting their business.

“HSBC has been helping its clients navigate uncertainty for 160 years,” says Volkan Benihasim, global head of FX, emerging markets rates and commodities at HSBC. “That’s what we do. And, despite uncertainty around tariffs, there will undoubtedly be further diversification of supply chains in Asia, which will bring about new trade corridors and new currency needs to meet the changing of business in the region. It’s part of our expertise to continue successfully accompanying our clients through this change.”

The winds of change were already blowing in Asia’s FX markets before the current trade uncertainties swept in. Authorities across a number of the region’s restricted markets had started to relax the rules governing their currencies and opened up the FX market to offshore investors. This has brought a flurry of trading activity and a significant increase in the level of trading sophistication among the region’s broad spectrum of market participants. As a result, Apac FX markets have become some of the most dynamic in the world.

Corporates in the region have been particularly active. Usually more risk-averse than other market participants and less tolerant of unexpected gains or losses, the frequency of volatility-inducing events in the past five years has substantially increased their awareness of the risks they face. To manage these risks, they are being increasingly flexible and open to more sophisticated FX hedging solutions than ever before.

China’s central position in Asia

Regardless of the outcome of forthcoming trade negotiations, it is undeniable that China will remain central to the economic fabric of Apac, and HSBC will be there to facilitate trade and investment flows in and out of the region. The bank’s determination to provide high-quality liquidity to clients looking to gain access to onshore and offshore renminbi (CNH) liquidity remains unwavering.

With its leading international bank position in the Chinese market, HSBC is always at the forefront of market FX developments in the country. To that end, HSBC initiated the first trade of the Macanese pataca when it was included in the China Foreign Exchange Trade System in January 2024; and, when China allowed a select number of qualified banks to trade CNH in its free-trade zones, HSBC was one of the first banks to execute trades under this new framework. Since its launch, this new trading regime has garnered significant interest from local interbank market participants and corporate clients in China.

“Being one of the first banks to trade CNH onshore underlines our position in the China market. In addition, we were able to support wider market participants in preparing for the new regulation on margining for uncleared derivatives in China,” says Benihasim. “We leveraged the expertise acquired in other jurisdictions and our extensive know-how, both in global and local markets, to provide critical insights to local participants and help them prepare for the upcoming regulatory change.”

In 2024, HSBC also streamlined key processes to enhance the client experience and operational reliability in China. To that end, the bank has electronified the onboarding process for trading FX products and digitalised post-trade, including enabling swift and accurate settlements.

HSBC has also developed tailored solutions that help local clients with significant global FX hedging needs to manage their overseas direct investments across international markets.

Hong Kong as a gateway

Since the creation of the CNH market in Hong Kong more than 15 years ago, the special administrative region has served as the largest provider of renminbi liquidity outside of mainland China. As Chinese companies continue to expand their business overseas and new corridors emerge, such as in the Association of Southeast Asian Nations and the Middle East, that role is likely to be reinforced as they tap into the deep liquidity Hong Kong markets offer. On a similar footing, the significant interest in China’s economy from international corporates and institutional clients is also driving significant FX activity from offshore clients towards Hong Kong.

The Bond Connect and Stock Connect schemes – initiated by Chinese regulators to encourage closer co-operation between mainland China and Hong Kong’s markets – have boosted FX liquidity in the city, and the introduction of a renminbi trade finance facility by local authorities in early 2025 will further drive the flow liquidity of the Chinese currency in Hong Kong.

“Throughout the years, China has been opening up the FX market to the outside world and we expect that trend to continue,” says Benihasim. “As the renminbi continues to internationalise and becomes increasingly used as a global trade currency, there is no doubt Hong Kong’s future as an FX hub will be reinforced. As the leading international bank in mainland China and Hong Kong, HSBC remains the go-to for offshore players with dealings in China and for onshore firms with international interests.”

Colloquially referred to as ‘the Hong Kong bank’, HSBC has been present in this important financial centre since the inception of the bank. While Hong Kong is a vital gateway for market participants seeking access to the Chinese onshore FX market, HSBC’s FX offering for the local market in this special administrative region is noteworthy in its own right.

With a diversified client base in Hong Kong spanning retail, wealth, corporates and financial institutions, HSBC has very high internalisation rates of spot flows, enabling it to achieve tighter pricing for clients, in addition to significantly reducing information leakage and market impact. Across all trading channels, HSBC leads its peers in the e-FX trading space, and the bank consistently ranks high in the provision of spot, forwards and swap liquidity on multi-dealer platforms, particularly for the USD/HKD currency pairs.

The trading of Asian currency has also gathered pace in Singapore, with non‑deliverable forwards trading by clients performing particularly well, and volumes increasing 30% over the past 12 months. Additionally, HSBC Singapore was the first registered foreign institution to transact a Korean won-deliverable FX swap offshore, as part of the Bank of Korea’s FX Market Structural Improvement Plan, aimed at liberalising the currency. As a result, eligible HSBC clients now enjoy longer trading hours for deliverable KRW.

Also, in Singapore, HSBC provided corporates with tailored analysis and strategies to manage their exposures and achieve their objectives. To this end, the bank introduced a new instrument – the bonus forward – to allow corporates to express a range-bound view on the FX market and achieve a more favourable hedge rate within that range. And, to better serve its growing client base of private banks, HSBC has enhanced distribution of FX derivatives through multi‑dealer channels.

In India, the authorities have gone a long way to liberalise the local FX market, with USD/INR trading now a 24-hour market and the creation of Gift City, a financial services and technology hub located in Gujarat. With an advantageous regulatory environment, Gift City provides international firms with a favourable access point into the growing Indian market and a good base for Indian firms going global.

With a presence spanning more than 150 years in the country, HSBC serves the full client spectrum in India. With a growing share of the market, HSBC can provide liquidity across products and is one of the few banks providing USD/INR pricing across time zones and for up to five years. Always at the forefront of product liberalisation, HSBC has now executed its first deal-contingent trade in FX options.

With an extensive network of trading and sales sites across Apac and worldwide, HSBC is able to provide its clients with access to deep onshore liquidity pools across a wide range of currencies and products. The bank tailors its approach to clients across countries to allow them to hedge their FX exposure in restricted currencies and around the world.

HSBC was named FX house of the year for Apac, China, Hong Kong, Singapore and India at the 2025 FX Markets Asia Awards.