AWARDS HSBC wins three awards, including best bank for renminbi

This time last year, HSBC announced its intention to become the number one bank in foreign exchange. Since then, the global banking behemoth has intensified its push into currency markets, carving out an increasingly dominant presence amongst top-tier market-makers.

“Our presence across the globe is one of our key strengths and a very powerful proposition when it comes to FX,” says Selene Chong, head of global FX & commodities, Asia-Pacific at HSBC. “Our reach and onshore presence around the world, our diverse client base and very strong execution capabilities enable us to grow our business.”

HSBC has been voted the winner of three categories at the 2017 FX Week Best Banks Awards: Best Bank for FX in Asia-Pacific, Best Bank for Renminbi, and Best Bank for Emerging European, Middle Eastern and African Currencies.

Five years ago, HSBC embarked on a plan to revamp its electronic infrastructure, including foreign exchange. Throughout 2016, the bank made a substantial investment in its distribution capabilities and risk systems, and launched execution algorithms for clients.

This ongoing investment is beginning to bear fruit, with substantial growth in market share in both G10 and emerging markets (EM) currencies. According to a survey of global investment banks by financial consultancy Coalition, HSBC ranks as joint-second with Deutsche Bank in G10 FX, just behind JP Morgan, for the first half of 2017.

“We have seen client volumes grow materially in the last 12 months, both in cash FX and in the space,” Chong says.

Emea currency options have fared particularly well, with volumes nearly doubling compared with 2016. “We are a very big EM house and we are equally ambitious in the G10 space,” she adds. 

Still, Chong emphasises that HSBC has no ambition to chase volume purely for the sake of market share: “It’s very important for us that we add value for clients, [and] we provide solutions considering their holistic hedging, investment and banking needs. We are not just there to provide execution to clients; we want to service them fully and provide thought leadership at the same time.” 

Three-fold advantage

HSBC Global Banking and Markets operates in more than 60 countries around the world, providing the bank with an extensive presence in global trade and finance. The firm’s strong roots in Asia-Pacific and its status as the largest foreign bank in China also help. And, despite the increasingly competitive domestic banks in countries such as China, HSBC is able to gain an edge on the strengths of the two-way flows between its domestic and international clients.

Being the foreign bank with the largest onshore footprint in China bodes well in a climate where the renminbi’s internationalisation and the trend of FX volumes shifting towards Asia are in their infancy.

The fact that we risk manage and structure products across one coherent, global FX options platform is a key strength

Selene Chong, HSBC

“I think the big trend this year in terms of the renminbi continues to be the two-way flexibility exhibited in the currency. We also continue to see more channels between onshore and offshore markets opening up, allowing more fund flows to cross the border and resulting in opportunities for clients,” Chong says.

As international investors can now access Chinese markets more easily and through a growing number of channels, liquidity has also improved.

“At the same time, we have seen more and more Chinese clients hedging their offshore exposure, gradually increasing the pool of market participants in both onshore and offshore markets,” she says.

HSBC’s size and scope is its second advantage, while the bank’s internal connectivity and network is its third competitive strength.

“Our risk management ability allows us to offer complex and illiquid products to clients. One trend we have seen over the years is Japanese investors shifting to EM, and most recently some Emea currencies. As an example, being able to offer structured option products competitively in crosses such as TRY/JPY is a very strong edge,” Chong says. “The fact that we risk manage and structure products across one coherent, global FX options platform is a key strength.”

Working closely within the bank also allows for developing new products such as merger and acquisition-contingent hedges for clients. But, says Chong, at the core, a lot of what HSBC does comes down to a single ingredient: reliability.

“Emea is a good example where we have seen quite a bit of intraday volatility, but we were still able to provide liquidity to the markets in times of stress. The ability to be a reliable and consistent market-maker, even when markets are disrupted, has been a key contributor to our success,” she adds.