Citigroup dominates emerging forex

Citigroup surged to the top in two of the three emerging markets categories this year, winning awards for best bank in emerging currencies in Latin America and Europe, the Middle East and Africa. But HSBC led the field in emerging Asian currencies, topping all three categories.

Bernard Yeung, senior dealer for Asian currencies at HSBC in Hong Kong said the bank has been focusing on specific emerging market countries that it believes have strong growth prospects and will attract the interest of the funds community. These include Taiwan, South Korea, India and China – the first three offering sound government and monetary policy and in China's case, global interest.

Yeung said the bank has been much more aggressive in these currencies and has seen more business as a result. "We're winning the business through repetitive business and competitive pricing," he said. "And it seems as if the fund community has been a lot more receptive to our pricing and aggressiveness."

Although the bank has been building up its focus on the funds community over the past few years, Yeung said that this year the bank has been "pitching a lot harder towards the hedge fund, cash fund business or commodity trading adviser business."

"Interest in Asia from these particular parties has strengthened, so what we've had to do is be a lot more competitive or be in the top percentile for pricing for these particular currencies," he said.

This has been a common theme among banks during the past year. Runner-up in the emerging Asian currencies category, Standard Chartered, hired Michael Drennan as head of global hedge fund sales in Singapore in August to build the bank's efforts for hedge funds, said Rudy Kuan, global head of emerging markets FX at Standard Chartered in Singapore.

But Yeung pointed out that the overall activity has reflected a change in sentiment towards the region. Where two years back, investors were shifting focus from the US to euro and to sterling, "we believe now [there] is a shift out of those particular currencies to being more heavily weighted in Asian currencies."

"With this shift in sentiment, most of the people that were burnt in the 1997/98 financial crisis are getting a bigger understanding of the Asian markets and are starting to put a little bit more of their portfolio into Asia," he added.

Kuan agreed adding that over the last 12 months FX has started to become viewed as a separate asset class. "There has definitely been a lot of capital inflow into this part of the world," he said. "The pressure of the dollar inflow into Asia intensified over the last two and a half months with all the talk about the ringgit de-peg and the [potential] Chinese changes to the foreign exchange regime."