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Monday, January 30, 2006
Bank exec to investors: Do hedge, avoid volatility risk
FOREIGN exchange forward transaction and hedging will protect companies when currency crisis and volatility occur.
“You can buy the foreign exchange forward as long as you have the necessary documents required by the Central Bank,” Wick Veloso, treasurer and head of global markets of Hong Kong and Shanghai Banking Corp. (HSBC)-Philippines told bank clients in an economic briefing last Friday at Shangri-La’s Mactan Island Resort and Spa.
A forward transaction involves purchase or sale of any commodity, foreign currency, government security or other financial instruments at the current price with delivery and settlement at a specific future date.
Managers of mutual funds hedge their exposure to currency or interest rate risk by buying or selling futures or options contracts. A futures contract is an agreement to buy or sell a specific amount of a commodity or financial instrument at a particular price on a stipulated future date.
Strategy
This can be a hedging strategy for an investor to minimize or eliminate risks.
Veloso said HSBC is involved in foreign exchange, interest rate trading, fixed income sales, investment banking and finance.
It also now offers structuring or hedging solutions depending on the needs of clients.
“The game of banking now is to provide client solutions that allow you to maximize your return of investment or have the cheapest cost of your funding. It also allows you not to have the volatility of foreign exchange exposure,” he said.
He said a hedging transaction is not offered to everyone, adding that HSBC is reviewing the corporate market in Cebu.
In an interview earlier, Philippine Exporters Confederation-Cebu executive director Fred Escalona urged exporters to learn how to hedge their current and future foreign exchange inventories to avoid serious risks and losses.
Veloso said for 11 years straight, HSBC has been the top foreign exchange bank in the Philippines.
“In the last Bureau of Treasury ratings, we’re the top four fixed income dealer. It’s tough because our balance sheet is not as big as the BPI (Bank of the Philippine Islands), Metrobank and PCI Equitable. That means we sell to a big number of customers,” he said. (ALC)
For Bisaya stories from Cebu. Click here. (January 30, 2006 issue)
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