BNP Paribas announced today that it is the first issuer in Asia to launch FX warrants with USD/CNH (offshore Renminbi) as the underlying, a major milestone in the development of USD/CNH as an asset class. The launch comes on the heels of the Hong Kong Exchanges and Clearing’s move to introduce Renminbi currency options through a USD/CNH contract in March 2017.
Increasing volatility in the Renminbi means investors have been seeking tools to hedge risk and trade in new market conditions. As Hong Kong’s only issuer listing FX warrants, BNP Paribas has seen increasing demand for this asset class.
“In June 2016, ahead of the Brexit vote and last November in the lead up to the US elections, turnover on FX warrants exceeded HKD36 million in each of these months,” said BNP Paribas’ Head of Exchange Traded Solutions APAC for Equity & Derivatives, Martin Wong. “Prior to 2014, as the Renminbi strengthened, many CNH investors acquired the currency in Hong Kong. However, with the USD strengthening on the back of Federal Reserve interest rate hikes, CNH holders are now looking for channels to hedge their CNH exposure.”
Traditionally USD/CNH options are traded over the counter (OTC) between institutions and banks. The listing of USD/CNH warrants will give investors with Hong Kong securities trading accounts the ability to take long or short positions, for both hedging and speculative purposes.
BNP Paribas will also launch USD/CAD FX warrants at the same time, offering Hong Kong investors potential currency exposure to the Canadian dollar. Investors with Hong Kong securities trading accounts will again have the ability to take either long or short positions in the USD/CAD.
Both the USD/CNH and USD/CAD warrants will commence trading on 11th May 2017.