HSBC’SEMERGINGMARKETSCURRENCYGUIDE：LEADINGTHEWAY1218.ppt

Macro,Currencies Global,December 2012,HSBCs Emerging,Markets Currency,Guide 2013,Leading the way,This compendium of regulations is an essential companion for investing,hedging or simply,transacting in Emerging Market currencies,While some countries will continue to move further along the path of regulatory tightening,some,are relaxing their regulatory frameworks,This guide provides the in-depth knowledge one needs to make the most of the increasing,opportunities that Emerging Market currencies continue to offer,Disclosures and Disclaimer This report must be read with the disclosures and analyst,certifications in the Disclosure appendix,and with the Disclaimer,which forms part of it,MacroCurrencies Global,abc,December 2012Emerging Markets FX:Regulatory understanding,a priorityUnderstanding the regulatory environment for Emerging Market currencies is a top priority.Given thesignificant periods of financial market stress seen in recent years,many countries will continue to promotefinancial stability as a key part of their economic policies.This in turn suggests that potential regulatorychanges will be influential for an increasing number of EM currencies.This regulatory shift has been unfolding over many decades and will continue to do so as the transfer ofcapital across borders intensifies.While some countries will continue to move further along the path ofregulatory tightening,other countries are relaxing their regulatory frameworks and opening their economiesup further.However,as we have said for some time,the legitimacy of regulation,which can impactcurrencies,is very much here to stay.Another key focus in the coming year will be how Emerging Market currency liquidity develops.Regulatorswill face the twin challenge of minimising exchange rate volatility while also keeping their FX marketsliquid.How different authorities approach these two tasks will need careful monitoring and will no doubtprovide certain opportunities in various currencies.One market of particular interest in recent years that will remain in the spotlight is the Chinese renminbi(RMB).In 2010,we flagged the opening of the offshore renminbi(or CNH)market.Once again,2012has seen a slew of changing regulations on the RMB in both the onshore and offshore markets,and thisguide contains all the latest regulatory updates and market information on that fast-growing currency.Weexpect the offshore RMBs development to continue to evolve at a rapid pace in 2013.Emerging markets will continue to drive global growth in coming years.These markets will become an evengreater focus for investment,new product development and currency regulation.Knowing the ins and outsof these currencies and how to deal in them is becoming increasingly important for investors and corporatesall across the world.This guide provides the in-depth knowledge that one will need to make the most of thebroadening global economy and the increasing opportunities that Emerging Market currencies offer.We hope you find this years Emerging Markets Currency Guide useful.1,MacroCurrencies GlobalDecember 2012Currency publications,abc,Currency OutlookOur Currency Outlook comprises feature pieceson the longer-term currency market outlook and ispublished monthly.It focuses on the G20.Currency WeeklyPrimarily focused on G10 FX,and published on aweekly basis,our Currency Weekly includes afeature on the major theme for the coming weekand trade ideas.The document also includesupdates of our Quantitative Indicators.EM FX RoadmapOur monthly EM FX Roadmap outlines the macrooutlook for EM currencies.It contains our tradingportfolio,and concise summaries of our calls onthe three EM regions.Asian FX FocusPublished bi-weekly,our Focus looks at regionalthematic and currency-specific issues.We alsorelease ad-hoc flash notes under the“Asian FX”title which usually analyse new developments inAsian FX markets.Asian FX Policy DashboardThe Asian FX Policy Dashboard provides acomprehensive monthly assessment of Asian FXpolicy,its costs,and the sustainability of theoverall policy regime.LatAm FX FocusRegular ad hoc pieces focusing on regionalthematic and currency issues in Latin AmericaLatAm FX PositionsThis monthly document looks at FX positioningdata in the region and analyses the key risks andopportunities in light of the data.,FX EdgeOur daily FX Edge publication analyses eventsand trends in the G10 currency markets.IMM FX Futures PositionsThis weekly document analyses speculativepositions held on the IMM futures market,andhighlights where positioning might be stretched.Trade RecommendationsOur trading notes provide short-term tacticaltrading recommendations by superimposingquantitative analysis on the underlyingmacroeconomic data,setting out specific take-profit and stop-loss levels.Quantitative AnalysisOur quantitative research focuses on constructingcurrency tools that offer systematic intelligenceon the markets.Flagship products include“risk on risk off”,bespoke currency overlay advice,surprise indices,and market risk appetite indices.In 2011,we introduced a“Risk on-Risk off(RORO)Index”,which measures the extent towhich the“risk on-risk off”phenomenon isdriving a range of different markets and assets.We also present two risk appetite indices:1)HSBC Market Risk Appetite Index aconventional price-based risk index;and 2)OpenPositions Risk Appetite Index a speculativepositioning based risk index.By watching howmoney flows between contracts,we are able tomeasure risk appetite more explicitly.Our Surprise Indices measure,on a weekly basis,the extent to which actual economic data differfrom market expectations in the G10 andAsian countries.,In addition to the HSBC Research Web site,these publications are also available on Bloomberg HSBO 2,6,94,8,10,96,15,98,21,23,26,32,38,40,46,49,53,56,66,73,79,84,82,89,91,MacroCurrencies GlobalDecember 2012Contents,abc,AsiaBangladeshi Taka(BDT)Brunei dollar(BND)Chinese renminbi(CNY)Offshore Chinese renminbi(CNH)Hong Kong dollar(HKD)Indian rupee(INR)Indonesian rupiah(IDR)Malaysian ringgit(MYR)Mauritian rupee(MUR)Pakistani rupee(PKR)Philippine peso(PHP)Singapore dollar(SGD)South Korean won(KRW)Sri Lankan rupee(LKR)Taiwan dollar(TWD)Thai baht(THB)Vietnamese dong(VND)Latin AmericaArgentine peso(ARS)Brazilian real(BRL)Chilean peso(CLP)Colombian peso(COP)Costa Rican coln(CRC)Guatemalan quetzal(GTQ)Mexican peso(MXN),5425969707686,Europe,Middle East and AfricaBahraini dinar(BHD)Croatian kuna(HRK)Czech koruna(CZK)Egyptian pound(EGP)Hungarian forint(HUF)Israeli shekel(ILS)Jordanian dinar(JOD)Kazakh tenge(KZT)Kuwaiti dinar(KWD)Lebanese pound(LBP)Omani rial(OMR)Polish zloty(PLN)Qatari riyal(QAR)Romanian leu(RON)Russian ruble(RUB)Saudi riyal(SAR)South African rand(ZAR)Turkish lira(TRY)UAE dirham(AED)Contacts listDisclosure appendixDisclaimer,9395100102104105107109110112114115117120122124126128130132,Peruvian nuevo soles(PEN)Uruguayan peso(UYU)3,4,MacroCurrencies GlobalDecember 2012,This page has been left blank intentionally,abc,MacroCurrencies Global,abc,December 2012Asia5,MacroCurrencies Global,abc,December 2012Bangladeshi Taka(BDT)Bangladesh Bank(BB),the central bank of Bangladesh,sets foreignexchange and monetary policies,and maintains the currency in amanaged float regime The BDT is non-deliverable and only convertible on the current account The market is closed on Friday and Saturday,SpotAn active and deep two-way market in USD-BDT is yet,Normal market conditionsNormal market conditions,to fully evolve.There are also some activities in FCY-BDT for G10 currencies.While there is no restriction forinterbank participants to transact in BDT against foreigncurrencies,corporate and individual clients can onlytransact for underlying commercial transactions.There,Onshore average daily spot volumeOnshore spot transactionOnshore spot bid/ask spreadOnshore average daily forward volumeOnshore forward transactionOnshore forward bid/ask spreadNote:Spreads are subject to change with market developments,USD25mUSD0.5-1m5-10 pips(0.05-0.10BDT)USD1-2mUSD0.5mDepends on the tenor,are no brokers in the market and most deals are doneover the phone and on the Reuters Dealing System.Forwards/FX swapsWhile there is an active FX swap market,most activityis in very short dated tenors.Most volumes aretransacted within one week and are used as funding bybanks.Outright forwards,which need to be backed bygenuine underlying transactions,are traded more oftenby corporate entities.These are usually for 3-6 monthtenors but longer tenors of up to 2-3 years can also beundertaken in small size.There is no regulatoryrestriction on forward tenors.Though there is no NDFmarket for the BDT,a market is developing for moresophisticated products.The only yield curve to indicate an interest rate termstructure is the treasury yield curve,which is not alwaysreflective of the actual market.There was an attempt inearly 2010 to reflect market rates by introducingDIBOR(Dhaka Interbank Offer Rate),which can beviewed on Reuters page“DIBR”.However,this doesnot meaningfully reflect the market rate and these ratescannot be used as proper benchmarks.OptionsThe central bank has eased its stance to allow BDTvanilla FX options in order to allow hedging ofunderlying exposures.However,prior regulatoryapproval is required for any new structures.6,Source:HSBCFX frameworkExchange rate mechanismThe BDT is only convertible on the current account andis non-deliverable offshore.Banks quote exchange ratesbased on prevailing market conditions whileBangladesh Bank(BB,the central bank)intervenesfrom time to time to adjust foreign currency liquidityand their expected market rates.Background BB is the primary regulator for the overall bankingindustry.Broadly,its objectives are to maintainprice and exchange-rate stability,exchange-ratecompetitiveness,drive monetary policy to maintainmacroeconomic stability and to promote growth inagriculture and other priority sectors.BB closely monitors the stability of the BDTexchange rate to maintain FX reserves and tomanage the monetary and credit system with a viewto stabilising inflation.In March 1994,the BDT was declared convertiblefor current account transactions.After the convertibility of the current account in1994,the BDT was pegged to a basket ofcurrencies of major trading partners.,2013,MacroCurrencies GlobalDecember 2012Liquidity at a glance,abc,12am,2am,4am,6am,8am,10am,12pm,2pm,4pm,6pm,8pm,10pm,12am,=least liquidityNotes:Times are based on Bangladesh local time=GMT+6 hoursSource:HSBC,=moderate liquidity,=most liquidity,In May 2003,the BDT exchange rate was declaredfloating when the band of the central banks USDbuying and selling rates was withdrawn.While theBDT exchange rate has been floating since then,the currency is not fully convertible.Repatriation and other regulationsRegulationsOnshore-onshoreOnshore entities can engage in both spot andforward transactions for valid underlyingcommercial transactions.Supportingdocumentation is required in some special cases.Banks can extend local currency working capitalfinance or local currency term loans to foreign-owned/controlled companies operating in,Onshore-offshore100%foreign-owned industrial enterprises andjoint-venture industrial enterprises located in exportprocessing zones may freely borrow in foreigncurrency from local banks as well as from abroadwithout prior approval from the central bank.Offshore-offshore There is no offshore market for the BDT.RepatriationNeither the remittance of non-residents income frominvestments in Bangladesh nor the remittance ofdividends declared from previous years accumulatedreserves requires prior central bank approval.Additional informationHoliday calendar,Bangladesh.Offshore-onshore Offshore counterparties can buy BDT but are notallowed to sell BDT to purchase foreign currency.,Date21 Feb17 Mar26 Mar14 Apr1 May,EventInternational Mother Language DayBirthday of Bangabandhu Sheikh Mujibur RahmanIndependence DayBengali New YearMay Day,Non-residents can invest in securities quoted on thelocal stock exchange,with foreign exchange broughtin from overseas.This can be achieved by opening anon-resident investors taka account(NITA)with anybank.Investors can buy foreign currency from their,23 May2 Aug8 Aug15 Aug28 Aug14 Oct15-17 Oct14 Nov25 Dec,Buddha Purnima*Jum-a-tul Bida*Eid-ul-Fitr*National Mourning DayJanmastamiBijaya DashamiEid-ul-Azha*AshuraChristmas Day,NITA after payment of capital gains tax and auditorcertification.Cash related to securities transactions,*Subject to the appearance of the moon,may last more than one day.Source:Metropolitan Chamber of Commerce and Industry,Dhaka,(i.e.purchases,sales and income)must be routedthrough this account.Travellers can bring in up to USD5,000(or theequivalent in other currency)without declaration.,Information sourcesBoard of InvestmentMinistry of FinanceDhaka Stock ExchangeCentral Bank of BangladeshExport Processing Zone AuthorityHSBC Reuters Dealing page,www.boi.gov.bdwww.mof.gov.bdwww.dsebd.orgwww.bangladesh-bank.orgwww.epzbangladesh.org.bdHSDK,7,MacroCurrencies GlobalDecember 2012Brunei dollar(BND)The Autoriti Monetari Brunei Darussalam(AMBD)is the bankingregulatory body in Brunei Darussalam The BND is fully convertible,and there are no exchange controls Under the Currency Interchangeability Agreement(CIA)betweenSingapore and Brunei,the BND is pegged to the SGD at par,abc,FX frameworkExchange rate mechanismUnder the Currency Interchangeability Agreement(CIA)between Singapore and Brunei,the BND ispegged to the Singapore dollar(SGD)at par.TheSGD is legal tender in Brunei,alongside the BND.This agreement allows both countries tointerchange their currencies at par with neitherrunning the risk of exchange rate fluctuations.Thisfurther facilitates trade and commerce between thetwo countries.Foreign investors and corporations can deal in spot.There is no FX forward or options market in Brunei.Under the CIA,hedging can be conducted via theSingapore Exchange or using over-the-counteroptions in Singapore.Tenors in the Singapore market are liquid up to oneyear,with prices available up to five years.BackgroundOn 15 July 2010,His Majesty the Sultan and YangDi-Pertuan of Brunei Darussalam announced theestablishment of a new entity to come into effect on1 January 2011,as the Autoriti Monetari BruneiDarussalam(AMBD).AMBD is responsible formonetary policy,monitoring financial institutionsand currency trading.The Autoriti Monetari Brunei Darussalam Order,2010,amongst other things,provides for theestablishment of the AMBD and its Board,anddeals with matters connected to the objects,operation,administration,functions,powers andduties of the AMBD.This includes relationsbetween the AMBD and the government;banks and8,financial institutions;as well as consequential andrelated amendments to other written laws thatgovern the activities supervised by the AMBD.The AMBD is a corporate body,acting as theCentral Bank of Brunei Darussalam,performingfunctions such as the formulation andimplementation of monetary policy,supervis