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Maybank’s hedging solution offers protection against downside currency risks

Content image - Phnom Penh Post
Maybank Cambodia CEO Cynthia Liaw.

Maybank’s hedging solution offers protection against downside currency risks

As the year draws to an end and the US dollar continues to fluctuate, Cambodia has been experiencing a lot of volatility. Banks have factored in further movement given the recent turn of events with the US elections. Being a US dollar driven economy, Cambodia has a unique advantage over its neighbouring counterparts, according to Cynthia Liaw.

In terms of regional foreign exchange trends, Mrs Liaw, CEO of Maybank Cambodia, gave some interesting insights for the coming year of 2017.Encompassing total assets of $165 billion, Maybank is a mainstay among the top five regarded banks of South East Asia. It has an international network of more than 2,400 branches and offices in 20 countries, employing 45,000 employees.

Maybank Cambodia is increasingly encouraging its regional customers to manage their business’s foreign exchange risks with the bank’s hedging solutions. When customers hedge, they can then lock in the foreign exchange rate for a period of up to 12 months for that particular transaction.

While foreign exchange hedging is usually done for businesses to “lock in” their costs/profits, it is increasingly used for locking in investment returns. Mrs Liaw spoke at length about the increased regional interest – Singaporean in particular – on investing in Cambodia and its US dollar economy.

“We have seen an increased interest with Singaporean customers especially with the low interest rates in Singapore,” she confirmed. Many Singapore customers are looking at investments with higher returns such as property purchases here in Cambodia with higher rental returns than in Singapore, or placement in USD fixed deposit with higher interest rates here.

J.T. Koh for example, a Singaporean gentleman who grew increasingly upset with the low yield of fixed deposits in Singapore, became one of the clients who benefited from the 12-month hedging solutions offered by Maybank Cambodia and spoke highly of the offer. Maybank’s hedge solution allows Koh to place his funds in USD fixed deposits to enjoy higher interest rates than in Singapore, without taking any foreign exchange risk.

“I am retired and I want a fairly stable investment portfolio. With this arrangement I am able to secure higher returns on my funds with minimal risk. Return on the investment in USD fixed deposit with Maybank here in Cambodia is equivalent to the returns of higher risks bonds in Singapore, and it is much safer to put the funds in fixed deposits with Maybank Cambodia. Maybank is a strong bank,” Koh said.

This investment option is also very attractive to investors of currencies that offer deposit rates at lower than one percent per annum such as Hong Kong dollars, Japanese yen and Sterling pounds. Another potential investment opportunity for 2017, according to Mrs Liaw, is in the booming property industry in Cambodia. “We see an increased interest from Singaporean customers who want to leverage their assets in Singapore to purchase property in Cambodia.

Acquiring a loan in Cambodia can be difficult for foreigners, especially if their assets and primary source of income are held overseas. Maybank allows their clients to leverage their assets in Singapore as collateral for investments such as property purchases in Cambodia. Lending rates in Singapore are less than 3 percent per annum compared to over eight percent per annum in Cambodia,” Mrs Liaw explained.

Elaborating further on hedging for business transactions such as import payments or export sales proceeds, Mrs Liaw spoke in detail on this hedging solution: “Hedging can be partial of up to 100 percent of the transaction amount.

However, in my experience, customers hedge 30 to 50 percent of the transaction amount. Customers with foreign exchange risk exposure and would like to know how they can use Maybank expertise should meet with us for discussion!”

Maybank’s foreign exchange business is strong, offering 28 currencies – both regional and global. Maybank is also able to provide the service round the clock, allowing customers to place the order anytime of the day.

On a parting note, Liaw concluded, “While we have just started these initiatives with our Singaporean customers, we are confident to work with all regional clients to offer them security through US dollar investment portfolios.”

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