In Asia, the Australian dollar against the US dollar topped the league table as the most-used FX rate underlying in Q2. Meanwhile, the issuance of structured deposits tracking the FX rates in China boomed.
FX rates-linked products finished the second quarter strong in Asia as investors remained favoured on the currency asset class led by the Australian dollar against the US dollar pair.
SRP data shows that the estimated sales volume of products linked to FX rates in the April-June period amounted to US$11.8 billion across five major Asia markets ex-China (Hong Kong SAR, Japan, South Korea, Taiwan, and Thailand), up more than 11% quarter-on-quarter (Q1: US$10.6 billion). The number of issuances egged up from some 6,040 products in Q1 to over 6,100 products in Q2.
Asia ex-China: issuance and sales volume of FX rates-linked products by quarter
Hong Kong SAR’s structured deposits most contributed to the rising trend of FX-linked products, led by the AUD/USD pair employed in 2,218 products, which had estimated sales of US$4.2 billion in the second quarter. Most of these FX-linked products have a short tenor of less than a year and feature a digital payoff structure.
In Q2, Hang Seng Bank and HSBC Bank maintained the top issuer positions of these structured deposits, with volumes of around US$2.68 billion and US$1.35 billion, respectively.
The latest development coincided with the AUD/USD pair heading north around two percent in the past three months, trading at 0.673 recently.
‘The currency most resilient in the face of dollar strength may be the AUD,’ Olivier Korber, senior FX and derivatives strategist at Société Générale, wrote in an FX trade idea note on Thursday. ‘The Reserve Bank of Australia (RBA) is the only G10 central bank that is contemplating raising rates in 2H, apart from the BoJ, and technical analysis suggests upwards momentum.’
Looking at other FX pairs, the US dollar against the China Offshore Spot (CNH) pair replaced the GBP/USD pair to become the runner-up FX underlying choice across five major Asian markets in Q2.
The USD/CNH pair underlying asset was the reference asset in 832 products with estimated sales of US$1.6 billion – all appearing via structured deposits sold in Hong Kong. Industrial and Commercial Bank of China topped the issuer league table on this currency pair with 426 products marketed, followed by HSBC Bank (294 products).
Asia ex-China: most-used FX underlying assets in Q2 2024 by issuance
The GBP/USD pair moved down to third place, with 713 products gathering an estimated sales volume of US$1.39 billion. Out of 713 products, 354 products were issued by HSBC Bank which led the pack.
Other popular FX underlying assets include the USD/CAD pair (609 products), AUD/HKD (413), EUR/USD (362), NZD/USD (347), and CNH/HKD (312).
Besides structured deposits, there were also 42 derivative-linked bonds (DLBs) and five derivative-linked securities (DLS) tracking the FX rates in the Korean market, mostly involving the USD/KRW pair.
Meanwhile in Thailand, there were 229 structured notes that tracked the USD/THB pair in Q2. Siam Commercial Bank with 111 products issued was the biggest issuer of these FX-linked notes.
China’s FX-linked products
There were over 4,400 FX-linked structured deposits issued in the April to June quarter in China, gathering estimated sales of US$141 billion.
Gold against the US dollar maintained its dominance as the most-used underlying in the country, which was employed in 2,019 structured deposits in Q2, more than doubling the 827 products seen in Q1.
China: most-used FX underlying asset in Q2 2024 by issuance
Next in line was the EUR/USD pair, with 1,810 products tracking the pair, up from 781 in Q1. This was followed by the AUD/USD pair, which was featured across 316 products, also up from 95 products seen in Q1.
Image: Galitskaya/Adobe Stock
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