United Overseas Bank (China) has completed the first transactions for two new cross-border foreign exchange (FX) solutions that further enhance the bank’s offering in the region.
The first solution is onshore hedging between the Chinese renminbi and Malaysian ringgit under the Appointed Overseas Office (AOO) Framework. The AOO Framework was launched by Bank Negara Malaysia to provide additional flexibilities on ringgit transactions where AOO can undertake back-to-back FX transactions to facilitate settlement of trade and ringgit assets between non-Malaysian counterparties and Malaysian residents, which include individuals and registered entities.
As one of the few AOOs in China, UOB (China) is able to execute renminbi-ringgit transactions including currency exchange, swaps and forwards for corporate and institutional clients. With the new onshore hedging solution, the Bank’s clients can streamline their currency exchange process, minimise FX costs and mitigate FX risks. UOB (China) completed its first renminbi-ringgit FX spot transaction via the AOO Framework in January 2019 for a client importing agriculture products from Malaysia.
To assist clients to seize more cross-border opportunities, UOB (China) also tapped the innovative policies offered in the Shanghai Free Trade Zone (FTZ) to offer hedging solutions for renminbi-foreign currency options under the Free Trade Accounting Unit (FTU). The option instrument, which encompasses interest rates, currencies and commodities, enables clients to optimise their funding and investments. In January, the Bank also executed its first US dollar-renminbi hedging for a syndicated loan to help a client manage its FX risk in view of the strengthening US dollar.
Mr Mark Yang, Head of Global Markets, UOB (China), said: “The Belt and Road Initiative and renminbi internationalisation continue to drive regional trade and investment flows. As a result, we are seeing a growing demand from our clients for diversified cross-border and cross-currency solutions to hedge their market risks.
“In 2019, we will remain focused on enhancing our market research and risk management strategies, and expanding our Southeast Asian currency-based solutions to serve our clients’ needs more effectively.”
UOB (China) is committed to providing clients with more comprehensive FX solutions. The Bank is a direct market maker of renminbi-Singapore dollar and renminbi-Thai baht, and is able to do direct trading for its clients through the China Foreign Exchange Trade System (CFETS). The Bank also partners regulators, industry bodies and the rest of UOB Group to keep clients updated on market developments, insights and potential opportunities across the region through events such as seminars.
The Bank’s FX business grew steadily in 2018. UOB (China) was among the top 40 traders in China’s interbank FX market and the top ten traders on CFETS’ trading platform on an Executable Streaming Prices (ESP) basis. UOB (China) is the only foreign bank among the top ten ESP traders.