Private credit might be less attractive than it was last year as investors rush into the market, but there are sweet spots to be found.
The $3 million trade is a five-year swap, with HSBC paying a floating rate at the three-month Vietnamese interbank offered rate in exchange for receiving a fixed dong rate from Standard Chartered.
Vietnam's central bank paved the way for interest-rate and cross-currency swaps with a blanket approval in December 2006, but this is the first trade to come to the market. Before the approval, such swaps were possible, but the central bank only issued approvals on a case-by-case basis.
The blanket approval should create a more liquid market that will allow banks and companies to make better use of interest-rate hedges to manage their exposure.
"While this is the first interbank dong interest-rate swap transaction in Vietnam, there is every expectation that other similar trades will follow," says Anita Fung, HSBC's treasurer and head of global markets Asia-Pacific, and chair of the Hong Kong Treasury Market Association.
Dong currency options are under development at HSBC and several other banks, and their development should open the possibility of structured swaps and a range of other more complex structured products.
This trade is the latest in a string of market-opening transactions that HSBC and Standard Chartered have carried out, particularly in China's derivatives market. The two banks pioneered renminbi non-deliverable interest-rate swaps and swaptions in 2005, non-deliverable renminbi interest-rate swaptions at the end of 2006 and the first such swap based on the new Shanghai interbank offered rate earlier this year.
Regulators keep their eyes open on tightening insurance industry by introducing more detailed risk management requirements, which could bring pressure on smaller players.
China and India are more obvious choices for AustralianSuper to consider in Asia Pacific, but the super fund currently lacks the expertise and prefers to stick to the US and Europe.
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Investors are increasingly turning to private companies and private debt in their hunt for ESG alpha, but the age-old problem of transparency and due diligence remains