Best Structured Product Provider – Non-flow FX
We also turned the spotlight to the emerging markets in the wake of the global risk aversion-related selloff on emerging market currencies. A window of opportunity was identified on the Turkish lira, where investors could take advantage of distressed market parameters to receive a reasonable coupon.
The US, Canada, and Mexico came to a last-minute agreement in October on a revised trade deal with the potential to replace NAFTA. The Trump administration has imposed tariffs on US$200 billion worth of Chinese goods with threats to cover a further US$267 billion should China retaliate — the sum of which would cover almost all Chinese exports to the US.
“Trade-related tensions between the US and other countries set the stage for an interesting thematic opportunity. It was mooted that escalation or de-escalation scenarios could lead to opposite responses in the related currency pairs,” said Ken Tan, head of FX investors solutions, WM&FO, global markets APAC at BNP Paribas.
Indeed, American policymaking decisions, especially within the Trump administration, have become increasingly unpredictable for market participants. Rather than taking a binary view on escalation or de-escalation, BNP Paribas demonstrated its advisory capabilities by providing an innovative solution focused on the magnitude of price movements instead of direction.
“Instead of expressing a specific directional view, we proposed payoffs where clients may potentially receive enhanced yields if the currencies move — higher or lower — from their initial levels at trade inception.”
The bank exhibited non-flow capabilities particularly from two standout structures: a USDCNH straddle certificate linked to gold, and a worst-of straddle linked to trade war-related currencies such as EUR, CNH, CAD, and MXN.
The bank’s nimbleness and swift time-to-market also came into play in the wake of the global risk aversion that led to a selloff of emerging market currencies and led to a window of opportunity on the lira for investors to receive a reasonable coupon through a USDTRY digital certificate.
Innovative solutions that have capitalised on directional uncertainty and quick moves to exploit short-term opportunities led Asia’s private banks to vote BNP Paribas as 2018’s Best Structured Product Provider – Non-flow FX.