![Risk.net](https://www.risk.net/sites/default/files/styles/print_logo/public/2018-09/print-logo.png?itok=1TpHrpuP)
Best in Hong Kong
Hang Seng Bank
![wendyyuen wendyyuen](/sites/default/files/styles/landscape_750_463/public/import/IMG/366/110366/wendyyuen-580x358.jpg.webp?itok=lpSWfmX9)
Hang Seng Bank avoided the Lehman Brothers Minibond troubles and adapted its products quickly, revamped its internal organisation and conformed to the inevitable regulations that followed. The bank was one of the first in Hong Kong to get approval from the Securities and Futures Commission (SFC) after the damage inflicted by the Minibonds and its products have broken their own records.
“We have taken on all the challenges in Hong Kong by enhancing our customer management systems and product/investor risk assessment,” says Wendy Yuen at Hang Seng in Hong Kong.
Keeping its products simple, the forex-linked structures have proved very popular. “The transaction amount and the number of trades based on our Maxi Interest FX-linked product have broken the bank’s record,” says Yuen. “In the last year, we have volumes of HK$150 billion (US$20 million) and we have done 239,000 transactions.”
In Hong Kong, new products need approval from the SFC. “Right now, at the end of our year-end programme, Hang Seng has the most products approved,” says Yuen.
Hang Seng was the first bank to get SFC approval for its HASE ELI program and it has dominated this market in 2010. “This product was very popular before the economic crisis but its sales were stopped for nine months afterwards. We were the first bank to get approval to sell it again,” explains Yuen.
“I believe that we are the first bank in Hong Kong to get SFC approval and I think this is a sign that the regulator has confidence in our new due diligence process,” she says. “We proved this to them with one of our products and we got authorisation. Our products are very transparent with simple mechanics and are really suitable for retail investors.”
The bank has adapted its internal structure, creating new teams and systems and developing existing ones. It has divided its branches into 15 districts and allocated a member of its new specialised investment sales managers team (ISM) to each district. Their role is to provide frontline support for wealth management and product training, and they will be fully equipped to handle sophisticated investor enquiries, says Yuen.
The new Professional Opportunity Management system is data-mining tool that focuses on investor statistics. “This is used to mine business opportunities and finding potential customers,” she says. The online, in-house system analyses statistics such as frequency of visits to the branch, investor preferences, use of previous data and how investors prefer to complete transactions.
The SFC-authorised HASE ELI (equity-linked investment) product can be linked to a range of products, such as single stocks and single, basket and daily callables. “It also has a high level of flexibility and we offer both regular and tailor-made services for investors,” says Yuen. “We have found the daily callable fixed coupon ELI to be the most popular of these structures, followed by the monthly callable fixed coupon ELI, daily callable fixed/accrual coupon with daily airbag and monthly callable fixed/accrual coupon with daily airbag.”
Having both issuer and distribution capabilities puts Hang Seng in a minority in Hong Kong. “We price and structure our own products and this obviously helps time to market,” says Yuen. “In addition, we have dedicated sales processes and internal control systems which have been developed over the last year.”
Hang Seng has also focused and developed its offerings and services for private banking and corporate investors. “We do not just target retail customers. We take care of our corporate customers’ wealth management needs and our private banking customers’ needs,” she says. “We have a dedicated sophisticated team for corporate customers that offers tailor-made solutions for any requirements these investors may have, and special private banking managers that offer a similar service.”
“The forex-linked CNY (Chinese yuan) Inverse Floater Note has attracted a lot of interest,” says Yuen. The note reacted quickly to the yuan clearing agreement signed in July 2010 changing the underlying currency to the yuan. “It has been particularly useful for corporations because if they have any extra cash in the yuan they can use it to invest further in this note to benefit from the appreciation of the yuan.
“The product can deliver the highest potential return from the yuan dependent on stable or upward movement. There is limited downside risk and no exposure to the exchange-rate risk on principal investment. The short tenor is a popular feature too.”
The bank has launched 36 tranches of the CNY version this year with the total volumes reaching roughly HK$1 billion. “We designed a note that allows investors to make gains/enhance yield based on the movement of the CNY,” says Yuen.
“Investor confidence is returning, albeit slowly. We have had faith in yield-enhancement products and their significant role in the low interest rate environment, and in the first quarter of 2010 we have seen forex-linked structured deposits and simple equity-linked notes playing important roles in the Hong Kong market.”
Click here to view the article in PDF format
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact info@risk.net to find out more.
You are currently unable to copy this content. Please contact info@risk.net to find out more.
Copyright Infopro Digital Limited. All rights reserved.
As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (point 2.4), printing is limited to a single copy.
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (clause 2.4), an Authorised User may only make one copy of the materials for their own personal use. You must also comply with the restrictions in clause 2.5.
If you would like to purchase additional rights please email info@risk.net
More on Structured products
A guide to home equity investments: the untapped real estate asset class
This report covers the investment opportunity in untapped home equity and the growth of HEIs, and outlines why the current macroeconomic environment presents a unique inflection point for credit-oriented investors to invest in HEIs
Podcast: Claudio Albanese on how bad models survive
Darwin’s theory of natural selection could help quants detect flawed models and strategies
Range accruals under spotlight as Taiwan prepares for FRTB
Taiwanese banks review viability of products offering options on long-dated rates
Structured products gain favour among Chinese enterprises
The Chinese government’s flagship national strategy for the advancement of regional connectivity – the Belt and Road Initiative – continues to encourage the outward expansion of Chinese state-owned enterprises (SOEs). Here, Guotai Junan International…
Structured notes – Transforming risk into opportunities
Global markets have experienced a period of extreme volatility in response to acute concerns over the economic impact of the Covid‑19 pandemic. Numerix explores what this means for traders, issuers, risk managers and investors as the structured products…
Structured products – Transforming risk into opportunities
The structured product market is one of the most dynamic and complex of all, offering a multitude of benefits to investors. But increased regulation, intense competition and heightened volatility have become the new normal in financial markets, creating…
Increased adoption and innovation are driving the structured products market
To help better understand the challenges and opportunities a range of firms face when operating in this business, the current trends and future of structured products, and how the digital evolution is impacting the market, Numerix’s Ilja Faerman, senior…
Structured products – The ART of risk transfer
Exploring the risk thrown up by autocallables has created a new family of structured products, offering diversification to investors while allowing their manufacturers room to extend their portfolios, writes Manvir Nijhar, co-head of equities and equity…