Best Banks Awards: HSBC

Towards the end of 2016, HSBC embarked on a project to reorganise its structure for non-market-making services and products, and set up these agency style offerings under its Global Intermediary Services arm.

The GIS business encompasses the whole of HSBC’s fee-based suite of services around the entire FX trade lifecycle, ranging from pre-trade services to execution and risk management, as well as transaction cost analysis and post-trade reporting tools.

Analytics and netting services are available in the pre-trade suite while clients can also access non-discretionary overlay facilities if they choose to outsource the risk management of the trade. Customers can also access algorithmic execution tools besides benchmark orders. Custody and transactional services are also under the GIS umbrella.

“This year we have seen more client demand for a full suite of FX services that spans the whole trade lifecycle,” says Selene Chong, head of global FX & commodities, Asia-Pacific at HSBC.

The initiative is built around three key pillars: transparency, automation and added value.

“We call products in the GIS group the wheel of services,” says Chong. “We have seen big growth in this segment and we expect this to continue.”

HSBC has been voted the winner of the Best Bank for FX in Asia-Pacific, Best Bank for Renminbi and Best Bank for Emerging Asian Currencies categories at the 2018 FX Week Best Banks Awards.

In the past, the firm stated its aim to become the number-one FX house in the world in 2016, and it has since continued to build on these ambitions.

We call products in the GIS group the wheel of services. We have seen big growth in this segment and we expect this to continue

Selene Chong, HSBC

One key advantage for the UK-headquartered dealer is its footprint in Asia, as well as its onshore presence and history in China.

Chong notes a key theme in 2018 has been the rapid continuation of the renminbi’s liberalisation, which has seen China’s regulators step up their efforts to open onshore markets to offshore investors under schemes such as Bond Connect.

“China has made its rules more palatable for corporates and investors offshore to access onshore markets. The pace of change this year has been rapid, with circulars coming out of the People’s Bank of China (PBoC) nearly every month,” says Chong.

Volkan Benihasim, head of FX cash trading, Asia-Pacific at HSBC, notes that in March, the announcement that Bloomberg would add Chinese bonds to its Bloomberg Barclays Global Aggregate Index in April 2019 has been a significant milestone for the renminbi’s process of liberalisation.

“The indexation of Chinese bonds, together with liberalisation steps from the country’s government, will make markets much more open and more volatile, which will be a significant step in the evolution of the renminbi as well,” adds Benihasim.

The past two years have already seen a huge amount of offshore investment flow into China’s bond market and this is likely to continue. Associated FX hedging is also expected to grow, as a new circular from the PBoC says offshore investors will no longer need to be linked to an onshore bank to hedge qualified bond investments.

Outbound interest

Meanwhile, in addition to accessing offshore FX liquidity through entities set up in Hong Kong or Singapore, or elsewhere, Chinese companies can also access the CNH market through the Shanghai Free-Trade Zone.

This outbound interest from Chinese firms is likely to intensify as a result of China’s One Belt One Road project, which will see the creation of a maritime and land-based link between China and Europe.

“We have also seen volumes grow significantly in the Shanghai Free-Trade Zone, where Chinese companies can access the CNH market without an offshore presence,” says Chong.

HSBC is well positioned for the rapid and unpredictable change, which is not only shaping Chinese assets and markets, but influencing those in the wider Asia-Pacific region as well, due to the firm’s extensive local presence.

“We have also seen volume growth in the Shanghai Free-Trade Zone, where Chinese companies can access the CNH market without an offshore presence,” says Chong.

Some of these currencies are restricted, while others are free-floating but illiquid. For clients to be able to access HSBC’s FX services with a single login, the bank had to invest heavily to create a back end that allows this to happen.

“We have [a] dedicated balance sheet and presence in 17 countries in APAC, and with a single sign-on, our corporates and institutional clients can access our pricing and services conveniently,” says Chong.

“Our systems are regionally and globally hooked up, which, together with our presence in the region and our risk management capabilities, allows us to be a leader in Asian currencies and the renminbi market,” she adds.

But this year has been a testing time to serve clients in Asia, as several currencies have seen volatility pick up due to a strengthening dollar, and trade tensions between the US and China. Chong says trade wars could eventually disrupt supply chains in Asia, but rather than dampening flows, he expects market participants to experiment with non-dollar invoicing.

“We have seen new trade corridors open up between Asean countries and Europe, turning away from the dollar as an invoicing currency. As a result of [a] shift in trade flows, we could see more of these new corridors open up,” says Chong.

Interviews with the 2018 FX Week Best Banks Awards winners

JP Morgan

Best Bank Overall for Foreign Exchange Dealing

Best Bank for FX for Banks

Best Bank for FX for Investors

Best Bank for Spot FX

Best Bank for FX Forwards

Best Bank for EUR/USD

Best Bank for USD/JPY

Best Bank for EUR/JPY

Best Bank for E-Trading

Citi

Best Bank for FX for Corporates

Best Bank for Currency Options

Best Bank for Structured Products

Best Bank for FX Prime Brokerage

Best Bank for FX in North America

Best Bank for Emerging European, Middle Eastern and African Currencies

Best Bank for FX Research and Strategy

HSBC

Best Bank for FX in Asia-Pacific

Best Bank for Renminbi

Best Bank for Emerging Asian Currencies

Deutsche Bank

Best Bank for FX in the Eurozone

ANZ

Best Bank for Australian Dollar

Barclays

Best Bank for GBP/USD

Best Bank for EUR/GBP

Best Bank for FX in London

UBS

Best Bank for Swiss Franc

NatWest Markets

Best Bank for FX Post-Trade Services

360T

Best Professional e-Trading Venue

Best Vendor for Dealing Technology

Refinitiv

Best Broker for Forward FX

Best Broker for Emerging Markets FX

LCH

Best FX Clearing House

EBS

Best Broker for Spot FX

Bloomberg

Best Market Data Provider for FX

Danske Bank

Best Bank for Scandinavian Currencies

Standard Bank

Best Bank for South African Rand

Best Bank for African Currencies excluding ZAR

BMO Capital Markets

Best Bank for Canadian Dollar

Banco Santander

Best Bank for Emerging Latin American Currencies

kACE

Best Vendor for Risk Management/Options Pricing Software

Saxo Bank

Best Prime-of-Prime House

BGC (no interview)

Best Broker for Currency Options