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Morgan Guaranty Shifts Asian FX Unit To Singapore From Hong Kong

BANKS

J.P. Morgan & Co. will next month close the forex trading operation of its Morgan Guaranty Trust Co. unit in Hong Kong and relocate it to Singapore. The move will focus the U.S. bank's Asia/Pacific FX trading operation in Singapore, where it will join a growing number of FX market participants.

The bank will transfer about four sterling and sterling-cross dealers to the new location, according to a spokesperson for Morgan Guaranty Trust, the Singapore branch of J.P. Morgan.

The J.P. Morgan group has decided to concentrate Morgan Guaranty's Asian dealing operation in Singapore, giving its branch there a remit to oversee forex trading in a region that extends from Australia to Japan. "Singapore is clearly the center to be in this part of Asia as far as forex trading is concerned," the spokesperson says.

The move is part of a business plan to "create a critical mass in one major center conducive to foreign exchange operations," says the spokesperson. Among the factors favoring Singapore are its competitive business costs and availability of staff, the spokesperson says.

Following a Trend

"There is a trend towards regrouping forex trading into bigger centers and several other houses have moved to Singapore," adds the Morgan Guaranty spokesperson.

The costs argument has certainly weighed heavily on Morgan's decision, according to other sources. A rule of thumb is that if costs are three in Tokyo, they're two in Hong Kong and one in Singapore, bankers in Hong Kong and Singapore say (FX Week, May 31, 1991).

The bank remains committed to Hong Kong with other activities including corporate finance, equity and debt financing still there. "We will also retain our yen trading in Japan and Aussie dollar trading in Australia," the spokesperson says. Morgan Guaranty maintains 10 traders in each center.

J.P. Morgan recently shifted its bullion operations to Singapore from Hong Kong and in another regional consolidation switched its European forex trading operation to London from Frankfurt.

Hong Kong Lobby

Meanwhile in Hong Kong, leading bankers have called on the government to use its exchange fund to boost the local forex market, which is now lagging two places behind Singapore at number six among global trading centers (FX Week, October 5). Daily forex turnover in April 1992, as reported for a Bank for International Settlements survey, was $73.9 billion in Singapore, compared with $61 billion reported in the British colony.

Bankers are also lobbying the People's Bank of China and the Central Bank of China--the central banks of the People's Republic and Taiwan, respectively--to put some $20 billion and $89 billion, respectively, behind the market. Bankers hope that these central banks will choose the Hong Kong market as the vehicle for their intervention policies. According to sources in Singapore, several large Asian central banks conduct their forex business there, giving rise to greater liquidity.

"What we lack are large transactions," says a Citibank spokesperson in Hong Kong. "These could be provided by the exchange fund and China's reserves held by the central bank," he says. "With large transactions we could hopefully attract interbank flows."

This comment was brushed aside last week by Hong Kong Monetary Agency chief executive Joseph Yam. "I take the view that the objective of reserve management is to minimize risk and maximize return," he says.

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