Deutsche Bank enhances FX platform
by Ben Poole
Deutsche Bank Vietnam is enabling offshore institutions and corporates to better manage their exposures to Vietnam’s restricted currency by launching new features for post-trade activity on its FX platform, Autobahn.
Adapting to new rules
The bank’s introduction of new Vietnam dong (VND) risk management options coincides with new Vietnam FX hedging rules introduced by the State Bank of Vietnam which took effect on 17 May 2021 to simplify onshore currency hedging for offshore entities.
The new simplified hedging rules enable foreign institutions to better manage Vietnam Dong exposures in post-trade transactions like foreign institutions investing in local currency government bonds. Foreign investors can now access the onshore forward price to hedge their underlying government bond exposure.
Foreign corporations now can also hedge for up to one year for long term liabilities such as intercompany loans, and roll over their hedge contracts until maturity of their liabilities.
"Under the new regulations, foreign institutions and corporations now have more tools to hedge their exposure to local currency fluctuations," said Quang Huynh-Buu, chief country officer for Vietnam at Deutsche Bank. "These rule changes are a positive step toward deepening foreign participation in Vietnam’s fixed income markets, and help facilitate the growing volume of foreign investment into Vietnam."
Building on a track record
Deutsche Bank’s expansion of VND FX pricing on its platform aims to cater to the growing volume of disbursed foreign direct investment (FDI) into Vietnam, which was USD 5.5 billion in April this year, up 6.8% year on year.
At end April 2021, registered FDI into Vietnam totalled USD12.25 billion, with foreign multinationals investing to develop manufacturing supply chains in the growing Vietnam economy, and foreign institutional investors seeking to participate in the country’s growth.
This news is the latest in a long line of FX innovations by the bank. Earlier this year, for example, Deutsche Bank and Continuum Energy Levanter, a subsidiary of Continuum Green Energy (Continuum), announced they had executed the world’s first green hedging transaction with a second party opinion based on a specially designed green hedge framework.
The two parties worked together to develop a green hedge framework to support the implementation of Continuum’s green bond framework. External reviewer, Cicero Green, issued the second party opinion on the green bond and the green hedge frameworks. The FX hedge solution was for a 6 years tenor in US dollars/Indian rupees on notional of US$185m, linked to Continuum’s green bond US dollar primary issuance and based on their green bond framework.
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