Winners rationale

Last year, private banks’ FX trading books in Asia were under pressure as volatility returned and currency movements diverged, putting the accuracy of investment calls and the efficacy of risk-mitigating solutions to the test. A strong greenback stole the spotlight in currency markets as the new Fed Chair, Jerome Powell, acted swiftly on his promise to raise rates multiple times throughout the year, while emerging market currencies suffered the combined effects of a hawkish Fed and aggressive US foreign policy.

Indosuez Wealth Management found itself on the right side of the dollar with a relatively bullish strengthening bias in early 2018 that was reinforced by rising US protectionism and trade tensions late in the first quarter. At that point, the bank suggested buying USD on dips through option strips on USDJPY. Similarly, for Asia’s commodity currency traders, the bank advised against direct bets with the USD and instead recommended investing through option strips on cross pairs such as AUDNZD.

Effective forward-looking bets aside, the bank demonstrated its ability to mitigate risk and manage losses from existing positions. For USDJPY accumulator/decumulator buyers, the bank provided timely tailored solutions to sell the same structure on the same positions by matching fixing and delivery dates with the notional principal to lock up profits. And for clients who held a bullish EURUSD view in 2017 when the EUR was at 1.12, the bank advised cutting losses and switching to take advantage of the USD which was looking to gain faster against the JPY. In conjunction with a knock-out option, clients had a chance to recover faster, and the barrier price was reached within two months.

Despite an especially challenging 2018, the bank boasted an extraordinary hit rate on its 269 investment calls — 6.4 times more calls than in 2017. In turn, clients responded to the performance of Indosuez Wealth Management’s FX team, resulting in remarkable year-on-year increases (as of end-October 2018) in both revenues (64%) and volumes (23%) in a year jam-packed with market headwinds.

Indosuez Wealth Management is Asian Private Banker’s Best Private Bank – FX Advisory for 2018.