For corporates engaged in international trade and business, unhedged FX risks can lead to lower earnings and suboptimal financial performance.
Risk management is therefore crucial for companies in the region to prevent their growth from being curtailed.
“Asean economies are set to grow well above the global average in 2023, and Asean’s global foreign direct investment share has almost doubled in the last four years,” noted Joanna Lee, managing director and head of corporate sales, markets and securities services, at HSBC Singapore.
“Multinational and Singapore corporates looking to tap into this growth opportunity are increasingly looking for banking partners that not only have an extensive Asian footprint, but also a global network (that provides) East-West connectivity.”
As the leading international bank in Asia, HSBC is “uniquely positioned” to provide its corporate clients with access to global markets, she said. The bank offers a suite of risk-management tools and investment solutions to enable clients “to effectively manage their businesses and participate in this growth story”.
Its arsenal includes dual-currency FX solutions, FX-linked structured investments, as well as gold-linked investments and equity-linked fixed coupon notes. These solutions are designed to help companies achieve better yields, compared with leaving funds in fixed deposits and current accounts.
They can also be paired with dual-currency investments that combine two financial instruments – FX options and deposits – to deliver interest rates higher than those of conventional deposits.
However, it is important to note that there is no one-size-fits-all approach.
These solutions are ultimately contextual, said Lee, and must be aligned to the specific goals and needs of each business. In fact, inaction and hastiness are two extremes that result in businesses being unable to effectively generate yields from their funds.
That is why HSBC engages in regular conversations with its corporate clients to understand their risk appetites, preferences and requirements, she explained, before tailoring yield-enhancement strategies for them.
Most of the bank’s clients that have picked up these solutions are accredited investors with net assets of more than S$10 million. Not only do they have an established risk-management policy and risk appetite for such solutions, they are well-informed of the technicalities and hazards involved.
Lee added that HSBC has a rigorous and comprehensive process to determine the suitability of a derivative product for a client. Before any trade is proposed and carried out, it conducts significant due diligence, and adheres to a strict and detailed executive procedure.
It is also one of the few banks in Singapore offering explicit pricing transparency disclosures to protect the interests of commercial banking clients.