In a mixed year for FX, BNP Paribas maintained a strong degree of flexibility in its offering to keep ahead of the competition. A difficult year for the RMB, new regulatory issues and evolving client tastes ensured a challenging time for FX linked structured product providers. “You have to keep your eyes and ears close to the market,” explains Simon Lau, head of FX structuring, Asia ex-Japan, fixed income APAC structuring at BNP Paribas. His team has maintained that vigilance.
Entering the year, BNP Paribas was particularly focussed on RMB-linked products, which were, until recently, considered a one-way bet. However, following changes in the trading band by the Chinese central bank and the way the dollar responded, BNP Paribas moved quickly to react, replacing forward notes with upside knockout but no downside protection to forward notes with downside protection and no upside knockout, in order to better suit clients’ needs.
In addition, BNP Paribas offered diversification from RMB-linked notes into other currencies. In Taiwan, it witnessed strong demand in product linked to the South African rand, proof that the currency is strongly linked to gold price and is seen as a liquid method of gaining exposure to the commodity but in a deliverable currency. Range accrual products, normally sold on a 2-5 year band were sold much more widely on a 5-10 year basis, with Lau seeing a 60-100% increase in demand for the products. BNP Paribas has directly benefitted from this new trend as many banks don’t have the appetite for such long-dated products.
Due to the ongoing domination of low interest rates leading to low volatility and volume across the market, FX-linked products witnessed increased inflows in 2014, as investors pulled money out of credit and rates to seek opportunities elsewhere. Despite this, the overarching uncertainty has created a most challenging environment. BNP Paribas’ ability to remain flexible, maintain commitment to product innovation and to cater to clients’ needs ensured that it has been voted by private bank gatekeepers as the 2014 Best Provider of FX-linked Structured Products.