This document provides a summary of HSBC's capabilities and services related to emerging market currencies. HSBC has a global presence across emerging markets and provides a full suite of foreign exchange and investment products supported by research and strategy teams. With over 10,000 local offices, HSBC has significant local expertise and market intelligence in emerging market currencies.

1. Macro
Currencies
December 2007
HSBC’s Guide to Emerging
Market Currencies 2008
The new encycle on what can and cannot be done
This compendium of regulations is an essential companion for investing, hedging or
simply transacting in emerging market currencies.
Although markets are gradually de-regulating, many restrictions and requirements remain.
With our global footprint, HSBC provides a full service across the emerging market’s universe
in both deliverable and non-deliverable currencies.
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

2. Macro
Currencies abc
December 2007
Emerging Markets FX:
Approach & Capabilities
The world's local emerging markets bank
HSBC’s tradition as a key player in emerging markets dates back more than 140 years. The Group has
10,000 local offices worldwide, including locations throughout Latin America, Asia and the Pacific Rim,
Eastern Europe, the Middle East and Africa. Of these, 86 are Treasury offices, serving 56 countries and
territories.
Our long-standing local presence in emerging markets gives us unrivalled local intelligence of both
regulations and market activity, while our extensive commitment to trading local markets gives HSBC an
enviable position in offering market liquidity to clients on a global basis. For our clients, this translates
into an unparalleled strategic advantage.
Investment products and services
HSBC supports clients with 24-hour sales coverage and services from our major trading centres in Hong
Kong, London and New York, offering a full suite of emerging market foreign exchange and investment
products. Our three major dealing centres work closely with local regional offices to ensure clients
receive best pricing and information flows.
Our emerging markets expertise and products are aligned with our own local investments, spanning:
Global foreign exchange
Local and hard currency debt markets
Derivatives
Research and strategy
HSBC’s Emerging Markets Research is central to the Group’s overall research effort. On economics, the
group consists of regional teams stationed locally and coordinated globally. A regional Chief Economist
is responsible for each team – Benito Berber for Latin America, Juliet Sampson for Eastern Europe,
Middle East and Africa, and Peter Morgan for Asia. This results in views that are insightful at the local
level and, at the same time, sensitive to global trends and events.
HSBC’s Global Currency Strategy group is headed by David Bloom and relies on its own research,
cutting-edge quantitative tools and extensive market intelligence to assist clients in assessing market
value. The goal is to offer clients the best, usable currency trade strategies on asset, country, regional and
market levels, looking at multiple asset classes. The flagship research publication is the Emerging
Markets FX Roadmap, which covers all emerging market currencies on a monthly basis.
1

3. Macro
Currencies abc
December 2007
Contents
Asia 3 Omani rial (OMR) 88
Bangladeshi taka (BDT) 4 Polish zloty (PLN) 90
Brunei dollar (BND) 7 Qatari riyal (QAR) 93
Chinese renminbi (CNY) 9 Russian rouble (RUB) 95
Hong Kong dollar (HKD) 14 Saudi riyal (SAR) 98
Indian rupee (INR) 17 Slovak koruna (SKK) 100
Indonesian rupiah (IDR) 21 South African rand (ZAR) 102
Malaysian ringgit (MYR) 26 New Turkish lira (TRY) 105
Mauritian rupee (MUR) 32 UAE dirham (AED) 108
Pakistani rupee (PKR) 35
Philippine peso (PHP) 38 Latin America 110
Singapore dollar (SGD) 42 Argentine peso (ARS) 111
South Korean won (KRW) 46 Brazilian real (BRL) 115
Sri Lankan rupee (LKR) 50 Chilean peso (CLP) 120
Taiwan dollar (TWD) 53 Colombian peso (COP) 123
Thai baht (THB) 57 Honduran lempira (HNL) 127
Vietnamese dong (VND) 65 Mexican peso (MXN) 129
Nicaraguan cordoba (NIO) 133
Peruvian nuevo soles (PEN) 135
Europe, Middle East and Africa 69
Bahraini dinar (BHD) 70 Uruguayan peso (UYU) 137
Croatian kuna (HRK) 72 Venezuelan bolivar (VEB) 140
Czech koruna (CZK) 74
Egyptian pound (EGP) 76 Contacts List 143
Hungarian forint (HUF) 78
Israeli shekel (ILS) 80 Disclosure appendix 144
Jordanian dinar (JOD) 82
Kuwaiti dinar (KWD) 84
Disclaimer 145
Lebanese pound (LBP) 86
2

4. Macro
Currencies abc
December 2007
Asia
3

5. Macro
Currencies abc
December 2007
Bangladeshi taka (BDT)
Bangladesh Bank (BB), Bangladesh’s central bank, maintains the
currency in a managed float regime
The BDT is non-deliverable and only the current account is
convertible
Since floating the currency in May 2003, USD/BDT has been
more stable under the BB’s close supervision
HSBC started its operations in Bangladesh in dated forwards may be structured to meet specific
1996. Within this short time HSBC has needs. FX swaps are only transacted with
established itself as the second largest interbank counterparties and are mostly up to 1
multinational bank in the country. month tenors.
The Bangladesh FX market is still nascent and Options
foreign currency can be bought against BDT only There is no developed BDT options market as yet.
in valid commercial transactions. Roughly 7% of However, HSBC will look at enquires on a case
country’s trade business is done through HSBC. by case basis.
We are one of the largest and most active market
HSBC is also a leading provider of structured FX
makers of spot FCY/BDT and G7 FX.
products and can offer clients solutions using FX
Spot options for risk management or investment
Speculation in BDT is not allowed. BB usually purposes.
gives indicative levels at which the currency
Normal market conditions
should be traded and banks generally do not quote
Normal market conditions
two-way prices. There are no brokers in the
Onshore average daily volume USD16m
market and most deals are done over the phone. Onshore spot transaction USD250-500k
Onshore bid/ask spread 10 pips (0.10 BDT)
Forwards/FX swaps Note: Spreads are subject to change with market developments
Source: HSBC
The forward interbank market is still somewhat
restricted due to some regulatory provisos and so FX framework
interbank forwards are not very active.
Underlying commercial transactions must be Exchange rate mechanism
present for any forward transactions (either with BDT exchange rates are no longer determined by
corporate or interbank counterparties). Usually BB. Banks now offer their own exchange rates
forwards are within 3-6 month tenors. With based on prevailing market conditions, while BB
specific approval from the central bank, long
4

6. Macro
Currencies abc
December 2007
Liquidity at a glance
12am 2am 4am 6am 8am 10am 12pm 2pm 4pm 6pm 8pm 10pm 12am
= least liquidity = moderate liquidity = most liquidity
Source: HSBC
Notes: Times are based on Bangladesh local time = GMT + 6 hours
intervenes from time to time to adjust expected Banks may extend local currency working
market rates. capital finance or local currency term loans to
foreign-owned/controlled companies
Background
(manufacturing or non-manufacturing)
BB regulates the banking industry under the operating in Bangladesh.
guidance of the Ministry of Finance. Broadly,
its objectives are to promote and maintain On 26 October 2002, BB directed all banks to
high levels of production, employment and cover forward sales with matching forward
real income in Bangladesh, while fostering purchases, and not to hedge forward sales to
the growth and development of the country's customers with spot purchases. BB also
productive resources. encouraged banks to purchase forwards from
exporters and inward remitters to alleviate
BB also aims to regulate the currency, to pressure on the spot market. In January 2005,
maintain forex reserves, and to manage the BB relaxed this rule such that banks are now
monetary and credit system with a view to required to cover 50% of their forward sales
stabilize inflation. with forward purchases.
After becoming convertible in 1994, the BDT Offshore-onshore
was pegged to a weighted currency basket of Offshore counterparties can buy BDT freely
Bangladesh's major trading partners. but are not allowed to sell BDT to purchase
The BDT was depreciated by BB by an foreign currency.
average of 6% p.a. between 1996 and 2002. Cash related to securities transactions (i.e.
The BDT was declared floating with effect purchases, sales and income) must be routed
from 31 May 2003. With most other FX through a non-resident investor’s BDT
regulations unchanged, this is deemed to be a account.
managed float, and the capital account is still Non-residents may invest in securities quoted
not convertible. on the local stock exchange with foreign
Repatriation & other exchange brought in from overseas. This can
regulations be achieved by opening a non-resident
investor’s taka account (NITA) with any
Regulations bank.
Onshore-onshore
Investors may buy foreign currency from this
Onshore entities may engage in both spot and
NITA account freely.
forward transactions for valid underlying
commercial transactions – supporting Travellers may bring in up to USD5,000 (or
documentation is required in some special equivalent in other currency) without
cases. declaration.
5

7. Macro
Currencies abc
December 2007
Onshore-offshore Additional information
100% foreign-owned industrial enterprises
Holiday calendar
and joint-venture industrial enterprises
Date Event
located in export processing zones may freely
2008 19 Jan Ashura*
borrow in foreign currency from local banks 21 Feb International Mother Language Day
26 Mar Independence Day
as well as abroad without prior approval from 28 Mar Eid-e-Milad-un-Nabi*
the central bank. 14 Apr Bengali New Year
01 May May Day
19 May Buddha Purnima*
Offshore-offshore 17 Aug Shab-E-Barat*
There is no offshore market for BDT. 24 Aug Jammastami
28 Sep Shab-E-Qudr*
01 - 03 Oct Eid-ul-Fitr*
Repatriation 09 Oct Durga Puza
08 - 10 Dec Eid-ul-Azha*
Remittance of non-residents’ income from 16 Dec Victory Day
investments in Bangladesh and remittance of 25 Dec Christmas Day
Note: *Subject to the appearance of the moon.
dividends declared from previous years’ Source: Metropolitan Chamber of Commerce and Industry, Dhaka
accumulated reserves do not require prior
central bank approval. Information sources
1 Board of Investment www.boi.gov.bd
Taxation Ministry of Finance www.mof.gov.bd
Dhaka Stock Exchange www.dsebd.org
Capital gains from foreign investment in the Central Bank of Bangladesh www.bangladesh-bank.org
Bgd Export Processing Zone Authority www.epzbangladesh.org.bd
equity capital market are not taxed although HSBC Reuters Dealing page HSDK
dividends earned on shares is subject to a
15% tax.
There are specific tax holidays and benefits
allowed for investment in any of the 8 Export
Processing Zones.
Taxation for investment in industry is similar
to local companies.
1
HSBC is not qualified to give tax and legal advice. Specific tax and
legal questions should be directed to your appropriate advisor.
6

8. Macro
Currencies abc
December 2007
Brunei dollar (BND)
The Brunei Currency and Monetary Board (BCMB) issues Brunei’s
currency and is responsible for maintaining monetary stability
The BND is fully convertible and there are no exchange controls
Under the Currency Interchangeability Agreement (CIA) between
Singapore and Brunei, the BND is pegged to the SGD at par
HSBC has maintained a continuous presence in The Currency Board issues Brunei’s currency
Brunei Darussalam since 1947. We are currently and is responsible for maintaining monetary
the largest foreign financial services organisation stability, while the Financial Institutions Unit
operating in Brunei, offering the broadest range of acts as the principal licensing and monitoring
banking services. agency for banks and finance companies
operating in Brunei.
FX framework
Exchange rate mechanism
Repatriation & other
regulations
Under the Currency Interchangeability
Agreement (CIA) between Singapore and There are no exchange control laws in Brunei.
Brunei, the BND is pegged to the Singapore Foreign investors and corporations can deal in
Dollar (SGD) at par. The SGD is customary spot.
tender in Brunei, along with the BND.
There is no FX forward market in Brunei.
This agreement allows both countries to
interchange their currencies at par without Under the CIA, hedging can be conducted via
either running the risk of exchange rate the Singapore Exchange (SGX) or over-the-
fluctuations; this further facilitates trade and counter (OTC) options in Singapore.
commerce between the two countries. Tenors in the Singapore market are liquid up to
HSBC manages and operates the clearing one year, with prices available up to five years.
house for all banks in Brunei. There is no FX options market currently.
Background
Brunei has no central bank. The Ministry of
Finance, through the Currency Board and the
Financial Institutions Unit exercises most of
the functions of a central bank.
7

9. Macro
Currencies abc
December 2007
Additional information
Holiday calendar
Date Event
2008 1 Jan New Year
10 Jan New Islamic Year*
7 Feb Chinese New Year
23 Feb National Day
20 Mar Prophet Mohammad’s Birthday*
31 May RBAF Day
15 Jul HM The Sultan’s Birthday
30 Jul Israk Mikraj*
1 Sep First Day of Ramadhan*
17 Sep Anniversary of the Revelation of
the Quran*
1-2 Oct Hari Raya Aidifitri*
8 Dec Hari Raya Aidiladha*
25 Dec Christmas Day
29 Dec New Islamic Year*
Note: * = Muslim Holidays are subject to change due to lunar sightings
Source: HSBC
** Tentative
Information sources
Brunei Currency and Monetary Board www.brunei.gov.bn
8

10. Macro
Currencies abc
December 2007
Chinese renminbi (CNY)
The People’s Bank of China (PBOC), China’s central bank,
maintains the currency in a managed float with reference to a
basket of currencies
The renminbi (RMB) is non-deliverable and partially convertible
Since the end of the de-facto USD peg in July 2005, the currency
regime and market have been undergoing gradual liberalization
HSBC has maintained a continuous presence in Spot
mainland China since 1865. We are currently the Onshore RMB FX spot is available with
largest foreign financial services organisation documentary proof.
operating in China, offering the broadest range of
banking services. HSBC was also the first foreign
Forwards/FX swaps
bank given permission to conduct renminbi In the onshore market, renminbi forwards and FX
business and trade in the renminbi interbank swaps are available to onshore institutions up to 5
market. HSBC is one of the 22 market makers in years maturity to hedge FX exposure. However,
the interbank RMB FX spot market, allowing documentary proof must be provided. In the
HSBC to provide two way quotations. HSBC is offshore market, the renminbi is traded as USD
active in the Chinese marketplace from offices in settled non-deliverable forwards. Tenors are
Shanghai, London, New York and Hong Kong, available out to 10 years, however, the best
offering the following products: liquidity is found in tenors of 1 year or less.
Spot FX, deliverable forwards and FX swaps Options
out to 5 years2 Dollar settled non-deliverable options (NDOs) are
available on the renminbi out to 5 years and
Non-deliverable forwards out to 10 years
further tenors on a case by case basis. Options
Non-deliverable FX options out to 5 years expire simultaneously with the NDF fixing
with further tenors on case by case basis publication.
Non-deliverable cross-currency swaps out to In terms of FX structured products, HSBC is a
5 years leading provider and can offer clients solutions
using FX options for risk management or
Non-deliverable interest rate swaps out to 5
investment purposes.
years
2
Onshore only – must be done through a designated FX bank
9

11. Macro
Currencies abc
December 2007
Liquidity at a glance
12am 2am 4am 6am 8am 10am 12pm 2pm 4pm 6pm 8pm 10pm 12am
= least liquidity = moderate liquidity = most liquidity
Notes: Times are based on Shanghai local time = GMT + 8 hours
Source: HSBC
Currency swaps Five currency pairs are traded in CFETS:
From 31 August 2007, institutions with FX USD-RMB, HKD-RMB, JPY-RMB, EUR-
forward licences, Designated Foreign Exchange RMB and GBP-RMB.
Banks (DFXBs), can trade CNY currency swaps In the interbank market, the daily trading
in interbank market. The currency pairs are: band of the RMB against the USD is +/-
USD, EUR, JPY, HKD, GBP against CNY. 0.5%, around the opening fix.
Interest rate swaps On 4 January 2006, the USD-RMB middle
CNY interest rate swaps (IRSs) are available for rate fixing changed from the previous CFETS
financial institutions and corporates to hedge closing to a weighted average rate quoted by
CNY interest rate risk. all RMB market makers before the market
opens.
CNY forward rate agreements (FRAs) can only be
executed with financial institutions registered with The bid/offer spread of the USD-RMB
the PBOC. exchange rate quoted to clients is limited to
1% around the USD-RMB middle rate as
Normal market conditions
announced by the PBOC.
Normal market conditions
Onshore daily average volume USD5-10bn From 1 January 2006 existing designated
Onshore spot transaction USD10-20m
Onshore Bid/Ask spread 10 pips (0.0010 CNY)
foreign exchange banks (DFXBs) were
Onshore forward transaction USD10m permitted to engage in a 'bilateral trading
Onshore forward spread 1-3M 30-50pips
(0.0030 – 0.0050 CNY) platform' which allowed them to trade
Offshore daily average volume USD3,000m directly with other member banks in the RMB
NDF transaction USD10m
NDF spreads 30-50 pips (0.0030 CNY) in 6M FX spot market, as opposed to just trading
Offshore implied option volatility spread 0.3 vol
with CFETS. However, they continue to be
Note: Spreads are subject to change with market developments.
Source: HSBC governed by the daily +/- 0.5% trading band.
FX framework Central bank intervention mechanism
The PBOC conducts its open-market
Exchange rate mechanism
operations via government bond repos as well
The RMB is a managed, non-deliverable
as issuing, buying and selling PBOC bills in
currency. the interbank market. The PBOC also issued
The exchange rate of the RMB is determined special placement bills to some local banks to
in the interbank foreign exchange market – discourage excessive credit growth in 2006.
the China Foreign Exchange Trade System
(CFETS).
10

12. Macro
Currencies abc
December 2007
Background The State Administration of Foreign
On 21 July 2005, China announced a 2.1% Exchange (SAFE) is responsible for
one-off revaluation of the RMB against the implementing exchange control regulations.
USD, and the reform of exchange rate Any non-explicitly addressed type of RMB
mechanism where the RMB would no longer conversion and repatriation requires prior
pegged to the USD, but instead managed with approval from SAFE.
reference to a basket of currencies. Fixing mechanism
Although the full detail of the basket was not Market opens at 9:30am and closes at 5:30pm.
disclosed at the time, on 10 Aug 2005 China
The CNY fix is taken 2 days prior to value
indicated that USD, EUR, JPY, KRW were
and is the rate at 9:15am HK time as decided
the main reference currencies in the basket.
by the PBOC and is published on Reuters
The other currencies included were SGD,
page SAEC. E.g. Value 28 April; fix 26 April.
MYR, RUB, AUD, THB and CAD. All these
currencies are among China’s top 15 trade Repatriation & other
partners. Adherence to the basket has been regulations
minimal.
Repatriation
The ability to quote in the local forward Dividends
market was previously highly restricted to Since July 1996, PRC authorities have
only the so-called “big four” – Bank of China allowed free RMB convertibility relating to
(BOC), Industrial & Commercial Bank of current-account items, including the payment
China (ICBC), China Construction Bank of dividends from after-tax profits, to be
(CCB), and Agricultural Bank of China effected at designated FX banks and
(ABC) – and other three local banks – Bank supported with written resolutions of the
of Communication (BoComm), Citic board of directors concerning profit
Industrial Bank and China Merchants Bank. distribution, audit reports and tax-clearance
On 2 August 2005, PBOC expanded the documents.
eligibility of RMB forward licenses to all Principal & interest
policy banks, state commercial banks, city Repayment and repatriation of principal and
commercial banks, rural commercial banks interest are capital-account items and subject
and rural cooperative banks, as well as to prior SAFE approval.
foreign banks. HSBC was granted approval
A & B shares
to trade RMB forwards in the interbank
A shares (denominated in RMB) are open to
market on August 2005, and obtained
approval to launch an RMB forward business Qualified Foreign Institutional Investors
(QFII) who have obtained approval from the
with corporate customers in September 2005.
PBOC, SAFE and the China Securities
The China Banking Regulatory Commission Regulatory Commission (CSRC).
(CBRC), which separated from the People’s
Repatriation of principal and proceeds
Bank of China (PBOC) in April 2003, has the
derived from A-share investments is subject
role of banking regulator. The PBOC is
to strict control.
responsible for monetary policy.
11

13. Macro
Currencies abc
December 2007
Sale proceeds and income from B shares used to cover current account transactions.
(denominated in USD and HKD) invested by However documentary proof, such as trade
foreign investors can be repatriated. agreements, must be provided.
All PRC-registered enterprises are required to Onshore entities can also access the local
obtain tax-clearance documents from the local forward market for hedging of the following
tax authorities in order to remit non-trading- capital items:
type payments to overseas entities in excess
repayment of domestic foreign currency
of USD1,000.
working capital loans
Regulations
repayment of external debt registered
China maintains strict controls on its with SAFE
currency, although recently some progress has
been seen towards easing restrictions. income or expenses of direct investment
registered with SAFE
Non-residents and Foreign Investment
Enterprises (FIEs) must obtain a Foreign facilitation of capital injections of foreign
Exchange Registration Certificate (FERC) to investment enterprises registered with
open a foreign currency account onshore. SAFE
There are three types of foreign currency remittance of foreign currency income of
accounts for non-residents: capital accounts an overseas listed domestic company
(for investment and repatriation), current registered with SAFE
accounts (for trade) and loan accounts (for
receiving and repaying loans). any other transaction with SAFE approval
Residents may hold foreign currency in Onshore currency options are currently not
onshore accounts. available.
Onshore-onshore HSBC was granted approval to trade RMB FX
Spot swaps in the interbank market on 1 April 2006
Only entities registered in China can trade and obtained approval to trade RMB FX swaps
RMB onshore. All spot RMB FX transactions with corporate customers on 8 June.
must be executed with a DFXB. DFXBs can Offshore-onshore
square their net RMB position in CFETS. No entities outside China are allowed to
On the current account, the RMB is freely participate in trading of the RMB.
convertible provided all deals are supported Onshore-offshore
by eligible documents. Corporates registered in China cannot buy or
On the capital account, all RMB conversions sell foreign currency offshore.
require SAFE approval except for converting Any resident borrowing from abroad is
foreign currency-registered capital into RMB. subject to stringent controls. All such loans
Forwards, FX swaps and options must be approved by and registered with
Onshore entities can access the local forward SAFE.
market provided these forward contracts are
12

14. Macro
Currencies abc
December 2007
Offshore-offshore
The offshore market is limited to non-
deliverable forward and swap instruments
(NDF, NDS).
HSBC was party to the first China NDS.
Taxation3
The base tax on corporate profits is 33%
(30% national and 3% local).
China has offered tax incentives to foreigners,
although this will likely change as China
moves towards compliance with WTO
regulations.
Additional information
Holiday calendar
Date Event
2008 1 Jan New Year’s day
6-12 Feb Lunar New Year
4 Apr Ching Ming Festival
1 – 2 May Labour day
9 Jun Tuen Ng festival
15 Sep Mid-autumn festival
29 Sep – 3 Oct National day
Source: Bloomberg
Information sources
The People’s Bank of China www.pbc.gov.cn
State Administration of Foreign Exchange www.safe.gov.cn
Ministry of Commerce www.mofcom.gov.cn
National Development and Reform Commission www.ndrc.gov.ch
China Banking Regulatory Commission www.cbrc.gov.cn
China Securities Regulatory Commission www.csrc.gov.cn
Reuters Fixing page PBOCA, HSBCNDF,
SAEC, CHIBOR
Bloomberg Fixing page APF1<go>
3
HSBC is not qualified to give tax and legal advice. Specific tax and
legal questions should be directed to your appropriate advisor.
13

15. Macro
Currencies abc
December 2007
Hong Kong dollar (HKD)
The Hong Kong Monetary Authority (HKMA) maintains a Currency
Board system that requires Hong Kong’s monetary base to be
fully backed by foreign reserves
The HKD is a freely tradable and convertible currency that is
linked to the USD with currency board backing
In May 2005, the HKMA introduced two-way convertibility in which
it guarantees to buy and sell at 7.75/7.85
Established in Hong Kong in 1865, The Spot
Hongkong and Shanghai Banking Corporation is The HKD is a freely tradable and convertible
the founding member of the HSBC Group and the currency that is linked to the USD and trades
Group’s flagship in Asia. HSBC is the largest within a band of 7.75 to 7.85.
bank in Hong Kong and provides a
comprehensive range of financial services:
Forwards/FX swaps
personal, commercial, corporate, trade services, The forward market is active with the best
cash management, treasury and capital markets liquidity in shorter dated tenors. Estimated daily
services, trust and custody services. From trading turnover in the forward market is approximately
floors in Hong Kong, London and New York, USD5bn. Normal transactions are around
HSBC is active in Hong Kong’s markets offering USD50m although much larger transactions are
the following suite of products: not uncommon in shorter dated tenors. There are
no restrictions on trading between onshore and
Spot FX offshore.
FX forwards out to 10 years Options
FX options out to 5 years and further tenors The options market is reasonably liquid with an
on a case by case basis estimated daily volume of USD1-2bn. Options are
commonly available out to 5 years with longer
Cross currency swaps out to 10 years
expirations available upon request. The normal
Interest rate swaps, local bonds and money size of an options transaction can be as high as
market products USD500m.
In terms of FX structured products, HSBC is a
leading provider and can offer clients solutions
14

16. Macro
Currencies abc
December 2007
Liquidity at a glance
12am 2am 4am 6am 8am 10am 12pm 2pm 4pm 6pm 8pm 10pm 12am
= least liquidity = moderate liquidity = most liquidity
Source: HSBC
Notes: Times are based on Hong Kong local time = GMT + 8 hours
using FX options for risk management or a mandate introduced in 1988 (though as yet
investment purposes. unused) allows the HKMA to impose
negative nominal interest rates should
Currency swaps and bonds
speculative flows become too great.
Hong Kong’s swaps markets are well developed
and offer excellent liquidity. HSBC is active in Background
currency and interest rate swaps as well as local Between 1974 and 1983, a floating exchange
sovereign and corporate debt markets. rate regime was in place.
Normal market conditions However, with huge volatility on all fronts –
Normal market conditions GDP growth slowed to 0.3% in 1975, before
Onshore average daily volume USD10bn climbing to 16.2% in 1976, and inflation
Onshore spot transaction USD10m swung from 2.7% in 1975 to 15.5% in 1980 –
Onshore bid/ask spread 5 pips (0.0005HKD)
Onshore forward transaction Up to USD50m on 15 October 1983 the government
Onshore forward spread out to 1 year 10 pips (0.0010HKD)
Implied option volatility spread 0.2% (depending on tenor) announced a link to the USD at a rate of
Note: Spreads are subject to change with market developments HKD7.80.
Source: HSBC
The purpose of implementing the currency
FX framework peg was to provide a stable exchange rate
Exchange rate mechanism environment to conduct business in Hong
Kong, during what was expected to be a
The HKD is a freely tradable and convertible
period of uncertainty leading up to the 1997
currency that is linked to the USD with currency
handover of sovereignty.
board backing. USD/HKD 7.80 is the rate at
which the note-printing banks can exchange HKD The Hong Kong government remains
notes for Certificates of Indebtedness and vice- committed to the peg arrangement.
versa.
Between September and November 1998 new
Central bank intervention mechanism measures were introduced by the Hong Kong
The HKMA has the ability to intervene anywhere government designed to strengthen the
within the 7.75/7.85 convertibility band. Liquidity currency board.
can be adjusted via open-market operations, In May 2005, the HKMA introduced a two-
including: way convertibility undertaking arrangement
issuing and buying Exchange Fund Bills whereby the HKMA stands to buy USD at
7.75 and sell USD at 7.85. Central parity
the discount window remains at 7.80.
direct intervention in the FX market
15

17. Macro
Currencies abc
December 2007
Repatriation & other by imposing almost no restrictions on starting a
regulations business in Hong Kong, except that all companies
must register pursuant to the Companies
Regulations
Ordinance. With few exceptions, the government
The government of Hong Kong maintains no
allows 100% foreign ownership of local firms.
controls on the currency:
Hong Kong does offer several regional and
There are no restrictions on the industry specific incentives, although the main
repatriation of capital. attractions for business are the low taxes,
developed infrastructure and generally open
There are no restrictions on the
attitude towards investment.
remittance of profits.
The base corporate tax rate is 17.5%.
There are no restrictions on borrowing
from abroad. To incorporate, a Certificate of Incorporation
must be obtained from the Companies Registry.
There are no restrictions on non-residents
borrowing locally. All tax issues should be addressed to the
Inland Revenue Service.
There are no restrictions on residents or
non-residents holding foreign currency in There are no capital gains or value-added
onshore accounts. taxes, though debate is ongoing about the
introduction of a GST.
The HKD is freely tradable and convertible.
Numerous tax deductions are available on
Onshore spot, forward and currency option expenses incurred for business.
markets are available to onshore and offshore
entities. The government makes no distinction Hong Kong has been strengthening its
between local and foreign companies. regulation of firms that produce
environmentally unfriendly products.
Both residents and non-residents are free to buy
and sell securities and other instruments on Additional information
Hong Kong’s capital and money markets, with Holiday calendar
no restrictions on the types of account available. Date Event
2008 1 Jan New Year’s day
There are no limitations on repatriation. 17 – 20 Feb Lunar New Year
Cross-border remittances are readily 5 Apr Ching Ming Festival
6 Apr Good Friday
permitted and the authorities do not require 9 Apr Easter Monday
the disclosure of any related information. 1 May Labour day
24 May Buddha’s Birthday
4 19 Jun Tuen Ng Festival
Taxation 2 Jul SAR Establishment day
26 Sep Mid-Autumn Festival
Foreign investment has been one of the driving 1 Oct National Day
19 Oct Chung Yeung Festival
forces behind Hong Kong’s development. The 25-26 Dec Christmas Day
government acknowledges the continued Source: HSBC, Bloomberg
importance of foreign investment in the economy
Information sources
The Hong Kong Monetary Authority www.info.gov.hk/hkma
4
HSBC is not qualified to give tax and legal advice. Specific tax and Invest Hong Kong www.investhk.gov.hk
legal questions should be directed to your appropriate advisor.
16

18. Macro
Currencies abc
December 2007
Indian rupee (INR)
The Reserve Bank of India (RBI) maintains the currency in a
managed, floating regime
The INR is not deliverable, is convertible on the current account,
and is relatively restricted on the capital account
The RBI monitors the value of the rupee against a Real Effective
Exchange Rate (REER)
HSBC’s origins in India date back to 1853, when Spot
the Mercantile Bank of India was established in The spot INR market is well developed and liquid,
Mumbai. HSBC has since steadily grown in reach with a large number of private, foreign and state-
and service offerings, keeping pace with the run banks participating.
evolving banking and financial needs of its
customers. We are dominant participants in the
Forwards
foreign exchange market offering the following Both local and offshore forward markets exist for
products: the rupee. Offshore non-deliverable forwards are
available out to 10 years. The fixing rate is set by
Spot FX5 the RBI and posted to Reuters page ‘RBIB’. The
Offshore, non-deliverable forwards/swaps out onshore deliverable forwards are typically
to 10 years available for hedging only, i.e. only entities with
underlying exposure can book forward contracts.
Onshore, deliverable forwards/swaps out to
However these rules have been liberalised through
15 years
the years and today corporate entities can use past
Offshore non-deliverable options out to 5 performance as underlying exposure and book
years and further tenors on a case by case contracts. (Detailed regulations on the same can
basis be availed from the local office or from the central
bank website www.rbi.org.in.) The best liquidity
Onshore money market instruments
in the forward market is for tenors of one year or
Onshore interest rate swaps out to 15 years less, but longer maturities are available.
Onshore options out to 5 years Options
The market for rupee currency options is still
relatively illiquid compared to other emerging
market currencies. Offshore, HSBC can quote
5
non-deliverable options out to 5 years. Onshore,
Customer sale of rupees can only be done onshore
17

19. Macro
Currencies abc
December 2007
Liquidity at a glance
12am 2am 4am 6am 8am 10am 12pm 2pm 4pm 6pm 8pm 10pm 12am
= least liquidity = moderate liquidity = most liquidity
Source: HSBC
Notes: Times are based on Mumbai local time = GMT +5.5 hours
the RBI lifted regulations prohibiting the trading The RBI intervenes actively in the foreign
of options on the rupee in 2003. There are still exchange market in cases of excessive
strict limitations on options trading onshore. For volatility.
instance, clients may not receive net premium and
Background
barrier products are not allowed.
Exchange controls are established by both the
In terms of FX structured products, HSBC is a government and the RBI. The Foreign
leading provider and can offer clients solutions Exchange Management Act (FEMA) of 2000
using FX options for risk management or mandates that the government will oversee
investment purposes. current account transactions while the RBI
Normal market conditions will regulate capital accounts transactions.
Normal market conditions Restrictions on purchases and sales of INR
Onshore daily average volume USD4-6bn have been significantly relaxed since the early
Onshore spot transaction USD5m
Onshore bid/ask spot spread 1 pip (0.01 INR) 1990s.
Onshore forward transaction USD5m
Onshore forward spread 1 pip (0.01 INR) Since 1995, the Indian rupee has had full
Offshore daily average volume USD200-400m
NDF transaction 1M USD5m current account convertibility, though
NDF spread 1M 3 pips (0.03 INR) exchange controls on capital account
Onshore implied option volatility spread 0.3 vol
Offshore implied option volatility spread 0.3 vol transactions remain in effect.
Note: Spreads are subject to change with market developments
Source: HSBC Fixing mechanism
The market opens at 9am and closes at 5pm
FX framework
Mumbai time (the market does not close for
Exchange rate mechanism lunch). It is open for corporates from 9am to
The exchange rate of the INR is determined in 4.30pm.
the interbank foreign exchange market. The
The INR fix is the rate at 12 noon two
RBI announces a daily reference rate for the
business days prior to value as published at
INR against the USD, JPY, GBP and EUR.
1pm on the RBI website and on Reuters. The
While there is no band or peg that the RBI reference rate is based on inputs from selected
monitors, the value of the rupee is tracked on Mumbai banks. Eg Value 28 April; Fix 26
the basis of the Real Effective Exchange Rate April.
(REER). The REER consists of 6 currencies:
To trade off the fix rate an order must be
USD, EUR, GBP, JPY, CNY, and HKD.
passed before 1.45pm (prime liquidity
However, the INR rate has been known to
between 11am and 1.30pm) on the value date.
deviate significantly from longer-term REER
trends. Mumbai cut expires 11.30am Mumbai time.
18

20. Macro
Currencies abc
December 2007
Repatriation & other Forwards and options
regulations Onshore entities can access the local forward
market, provided these contracts are used to
Regulations
cover genuine foreign exchange exposure.
Non-residents may borrow locally, however
Documentary proof – such as invoices or trade
the money may not be remitted overseas.
agreements – must be provided to the
Spot authorised dealer. The RBI does allow hedging
Only “authorised dealers”, who are registered of trade exposure based on a company’s past
with the RBI, can engage in buying and performance, subject to certain limits.
selling of INR against foreign currencies with Onshore forward contracts can be freely
the public. These positions are squared off in
booked and cancelled for exposures of up to
the interbank market. one year. Forward contracts booked for capital
All FX transactions against the INR must be account exposures of more than one year, once
executed and settled onshore. cancelled, cannot be rebooked.
Market participants may buy rupee freely FIIs may hedge their exposures onshore
from any bank for transactions approved through forward contracts or options.
under FEMA. Approval is not required for All forward contracts booked by residents to
most current account transactions
hedge current account transactions are
However, some types of transactions may be allowed to be cancelled and rebooked freely.
subject to limits, where approval from the This is, however, not applicable to contracts
Reserve Bank of India (RBI) is necessary. booked on past performance basis.
Purchases of foreign currencies against INR Onshore INR currency options have been
are allowed for current account transactions permitted since July 2003. All regulations
such as trade and services payments, for relating to forward contracts also apply to
repatriating profits from foreign-funded currency options. Net receipt of premium is
companies, as well as for daily recurring not allowed under any option structure. Only
transactions in the ordinary course of business vanilla calls, puts and combinations thereof
(eg, travel). are allowed. Barrier options are not allowed
in the onshore INR option market.
The INR is not convertible on the capital
account unless transactions come under the Residents borrowing from abroad are subject
standing approvals issued by the central bank to regulatory controls. However, there is an
for routine capital account transactions, such automatic route that allows corporates to raise
as investments by Foreign Institutional External Commercial Borrowings (ECBs)
Investors (FIIs). Other permitted capital from overseas lenders within designated limits
account transactions include foreign direct and for specific end-uses.
investment, foreign currency loans and bonds,
Since 1 January 1993, foreign investors can
securities and equity investments overseas.
hedge any proposed FDI through forward
contracts provided they have received all the
regulatory approvals and completed all the
19

21. Macro
Currencies abc
December 2007
formalities relating to the proposed most (but not all) sectors of the economy.
investment. Incentives are offered to companies willing to
invest in certain industries and underdeveloped
Other hedging instruments
regions of the country. It should be noted that the
Companies are allowed to use currency and
laws regarding foreign investments and taxation
coupon swap transactions to hedge the FX
have been known to change often. It is the
exposure on long-term foreign currency loans
responsibility of the Ministry of Finance to levy
or to lower interest costs on INR-denominated
taxes.
borrowings.
The corporate tax rate (including surcharge) is
Companies can use interest rate options, caps,
41.82% for foreign companies and 33.66%
collars and forward rate agreements (FRAs) to
for local companies.
hedge the interest rate exposure on their
foreign currency borrowings. The Indian government has been easing
taxation, but municipal taxes and other
Repatriation
surcharges are still in effect.
Dividends
Companies are allowed to remit dividends Companies investing in underdeveloped areas
overseas to foreign investors after they have or infrastructure development are eligible for
been declared by the board of directors. a tax holiday.
Companies are also allowed to hedge the FX India has bilateral taxation treaties with 78
exposure on this dividend on behalf of the countries.
foreign investors.
Additional information
Non-resident companies can remit dividends
Holiday calendar
after all applicable taxes are paid.
Date Event
Interest 2008 26 Jan Republic Day
Remittance of interest on foreign currency 21 Mar Good Friday
14 Apr Ambedkar Jayanti
loans / bonds is permitted. 1 May Maharashtra Day
15 Aug Independence Day
Principal 2 Oct Gandhi Jayanthi
25 Dec Christmas Day
Remittance of principal is allowed as per the Source: Bloomberg
original loan agreement.
Information sources
Tax clearance documentation must be
Reserve Bank of India www.rbi.org.in
submitted for non-trade-related payments. Ministry of Finance finmin.nic.in
The Associated Chambers of Commerce www.assocham.org
Taxation6 and Industry of India
Reuters Fixing page RBIB
Bloomberg Fixing page APF1<go>
Historically, India has not been particularly open
to foreign investments. Over the past decade,
however, India has eased restrictions and now
allows full foreign ownership of businesses in
6
HSBC is not qualified to give tax and legal advice. Specific tax and
legal questions should be directed to your appropriate advisor.
20

22. Macro
Currencies abc
December 2007
Indonesian rupiah (IDR)
Bank Indonesia (BI), the central bank of the Republic of
Indonesia, operates a managed floating currency regime
Offshore, the rupiah is only tradable on a non-deliverable basis
The offshore NDF market is moderately liquid with an estimated
daily turnover of USD500m
HSBC opened its first Indonesian office in Jakarta Spot
in 1884, and expanded its operation to Surabaya The IDR is a non-deliverable, freely floating
in 1896. HSBC offers a broad range of banking currency. However, Bank Indonesia (BI),
and financial services, tailored to meet the wide Indonesia’s central bank, occasionally intervenes
spectrum of needs of multinational corporations, to curb excessive market volatility.
local businesses and individual Indonesians.
These include custody and clearing services,
Forwards/FX swaps
institutional banking, global payments and cash Offshore, the IDR is traded on a non-deliverable
management, investment banking, trade services, forward basis. There is an onshore forward market
treasury, and capital markets. HSBC is active in where participants are free to buy IDR.
Indonesian markets from trading floors in Jakarta, Documentary proof is required for buying foreign
Hong Kong, London and New York, offering the currency if the amount exceeds IDR100m. Non-
following products: residents are allowed to sell USD forwards,
however, supporting documentation is required.
Spot FX7
Options
Non-deliverable forwards out to 1 year
Onshore currency options are now available.
FX options out to 5 years and further tenors Offshore, HSBC can quote non-deliverable
on a case by case basis options out to 5 years and any long tenors will be
considered on a case by case basis.
Cross currency swaps out to 5 years
In terms of FX structured products, HSBC is a
Local bonds and money market instruments
leading provider and can offer clients solutions
using FX options for risk management or
investment purposes.
7
Spot FX is only available onshore. Non-residents may only transfer
funds in exceptional circumstances
21

23. Macro
Currencies abc
December 2007
Liquidity at a glance
12am 2am 4am 6am 8am 10am 12pm 2pm 4pm 6pm 8pm 10pm 12am
= least liquidity = moderate liquidity = most liquidity
Source: HSBC
Notes: Times are based on Jakarta local time = GMT +7 hours
Currency swaps and bonds Under the crawling peg regime, the IDR
Onshore, cross currency swaps are allowed, but underwent a managed depreciation at an
documentation is required to sell or buy foreign average annual rate of about 4% versus the
currency against rupiah. Liquidity in the local USD for the five years before 1997, until it
debt market is relatively low. was floated during the Asian crisis.
Normal market conditions On 19 January 2001, Bank Indonesia (BI)
announced that a new rule would be enforced
Normal market conditions
to prohibit onshore banks from lending to
Onshore average daily volume USD700m
Onshore spot transaction USD2m non-resident accounts or any IDR transfers to
Onshore bid/ask spread 5 pips (5 IDR)
Onshore forward transaction USD300-500m offshore accounts.
Onshore forward spread 10 pips (10 IDR)
Offshore average daily volume USD500m Although not explicitly stated, this meant that
NDF transaction USD5m
NDF spreads 20 pips (20 IDR) offshore trading in IDR would no longer be
Onshore implied option volatility spread 1.0 vol for all dates allowed. The IDR thus became a non-
Offshore implied option volatility spread 0.75 vol for all dates
Note: Spreads are subject to change with market developments
deliverable currency.
Source: HSBC
BI reaffirmed that the spirit of the regulations
FX framework was to mitigate IDR volatility by eliminating
its availability overseas, and that it had no
Exchange rate mechanism
intention of moving away from the free-
The IDR is a non-deliverable, freely floating floating exchange rate system or introducing
currency.
capital controls.
Central bank intervention mechanism Fixing mechanism
BI occasionally intervenes to curb excessive Market opens 9am; Lunch 12-2pm; Market
market volatility by transacting through major closes 5pm.
state banks or directly with banks.
The IDR fix is taken 2 days prior to value and
It also occasionally intervenes verbally by is the rate at 10am Jakarta time as per average
directly calling the active banks to reduce polling conducted by the association of banks
their speculative trading. in Singapore using contributing banks’ prices.
Background The fixing rate is published on Reuters's page
Indonesia adopted a crawling peg regime in ABSIRFIX01 or on Telerate page ‘50157’.
1986. The value of the IDR was monitored Both Singapore and Jakarta holidays apply.
against a basket of the currencies of
Indonesia’s main trading partners.
22

24. Macro
Currencies abc
December 2007
Table 1: For transaction values above IDR500m, the following documents are required
Transactions Documentary proof required
1. Payments related to acquisition of direct investment:
Dividend payments Copy of shareholders’ meeting results
Direct investments Copy of sale-and-purchase contract
2. Payments related to transactions of IDR securities/valuable
paper issued by Indonesian entity:
Sales and purchases of securities Copy of sale/purchase confirmation from broker or other
authorised party
Dividend payments Copy of dividend payment confirmation from issuing company
Interest payments for bonds and other securities Copy of payment notification from issuer of bond or other securities
SBI transactions Copy of BDS or equivalent proof
3. Payments related to offshore borrowings in IDR Copy of credit agreement
(including debt restructuring)
4. Opening of import D/C at onshore banks Copy of import documents
5. Opening of local D/C (SKBDN) Copy of purchasing documents
6. A) Purchases of goods and services in Indonesia Copy of binding documents or sale/purchase invoices
B) Purchases and sales of goods and services in Indonesia
7. Costs of living for foreigners in Indonesia Copy of binding documents invoices
Source: HSBC
E.g. to trade off the fix for value 28 April, up to IDR500m without documentation.
orders must be passed before 10.30am on 26 However, in the case of the non-resident
April. party, he/she must state the reason for the
transfer.
Indonesia cut expires 11am HK.
For any incoming/outgoing amount above
Repatriation & other
USD10,000 or equivalent, both parties must
regulations advise the bank as to why the transaction is
Regulations required. Information is reported to BI on a bulk
All offshore counterparties, who wish to deal no-name basis for statistical purposes only.
in the onshore FX market, should provide the
Margin trading of foreign currency against
supporting documentation of their economic
IDR is strictly prohibited in the onshore
activity in Indonesia to BI. International
market.
transactions and transfers have specific
limitations (see Table 1). Derivative transactions
Banks are prohibited from conducting margin
IDR is not allowed to be transferred out of trading in foreign currency against the rupiah
Indonesia. for derivative transactions, whether for their
All foreign exchange transactions between an own account of for the account of customers.
onshore entity and an offshore counterparty However, margin trading in foreign currency
must be reported to BI. against foreign currencies is allowed, but
Both residents and non-residents may hold subject to conditions stated in BI regulation
foreign currency accounts in Indonesia. No. 7/31/PBI/2005, article 4.
Rupiah may be transferred from residents to
non-residents within Indonesia for amounts
23

25. Macro
Currencies abc
December 2007
Table 2: Allowable transactions for spot and forward trades
Transaction type __________________ Spot___________________ ________ Forward__________ __________ Swap __________
Buy IDR Sell IDR Buy IDR Sell IDR S/B IDR B/S IDR
Sell FCY Buy FCY Sell FCY Buy FCY B/S FCY S/B FCY
Offshore non-bank with local bank 1,2,3,4,5,6A Permitted 1,2,3,4,5* 1,2,3,4,5* 1,2,3,4,5* 1,2,3,4,5*
IDR funds not staying for more Min tenor 3M Min tenor 3M
than 2 business days
Offshore non-bank with offshore bank Beyond Bank Indonesia control, but can not be settled onshore if dealt.
Offshore bank with local bank 1,2,3,4,5,6A Permitted 1,2,3, 4,5* 1,2,3,4,5* 1,2,3,4,5* 1,2,3,4,5*
IDR funds not staying for more Min tenor 3M Min tenor 3M
than 2 business days
Offshore bank with offshore bank Beyond Bank Indonesia control, but can not be settled onshore if dealt.
Resident with local bank Permitted Permitted Permitted Permitted Permitted Permitted
Note: * = SBI and interest/coupon/dividend of an investment are not eligible for hedging. Hedging L/C or SKBDN can be less than 3 months.
Permitted transactions types as referred to in Table 1.
Source: HSBC
Onshore-onshore In all instances, IDR-related FX deals must be
Onshore entities are free to access the local transacted with onshore banks, and any IDR
spot and forward markets without supporting payable to counterparties must be credited to
documents (Table 1). an onshore account.
Currency accounts in all major trading Local banks are prohibited from entering into
currencies are available from banks licensed to the following types of transactions with non-
deal in foreign currencies, with no restrictions residents:
on foreign currencies held by non-residents. If
Extending credit in IDR or foreign
they receive domestic currency (IDR), they
currencies, unless through certain retail
need to show supporting documentation or
consumer loans
stated purpose of the transactions depending
on the amounts received. Granting overdraft facilities, including
temporary and intra-day overdrafts
Offshore-onshore
(however, see below)
BI rules allow foreign investors to buy IDR as
long as they show proof of investment in Placing IDR funds with non-residents,
Indonesia. including IDR transfers to banks offshore
Offshore entities are required to provide proof Purchasing securities in IDR issued by
of underlying economic activity in order to non-residents
buy and sell IDR versus USD FX spot, or
Inter-office transactions in IDR
through forward contracts.
Table 3: For IDR transfers
IDR TO Resident with a/c at Foreigner with a/c at Resident with a/c at Foreigner with a/c at
IDR FROM local bank local bank offshore bank offshore Bank
Resident with a/c at local bank Permitted 1,2,3,4,5,6A,7 Prohibited Prohibited
Foreigner with a/c at local Bank Permitted 1,2,6B,7 Prohibited Prohibited
Resident with a/c at offshore bank Permitted 1,2,3,4,5,6A,7 Prohibited Prohibited
Foreigner with a/c at offshore bank Permitted 1,2,6B,7 Prohibited Prohibited
Note: Permitted transactions types as referred to in Table 1.
Source: HSBC
24

26. Macro
Currencies abc
December 2007
Equity participation in IDR with non- The corporate tax rates are as follows:
residents
10% on the first IDR50m
Document verification is the responsibility of
15% on the next IDR50m
remitting banks and receiving banks.
30% on income in excess of IDR100m
Onshore-offshore
Loans from abroad to state-owned companies All payments made overseas are subject to a
and foreign investment companies need BI 20% withholding tax, which may be reduced
approval in advance. by tax treaties.
All other foreign borrowings must be reported Branch offices are generally not permitted in
to the Finance Ministry and BI. Indonesia.
Repayment of approved loans is unrestricted, Additional information
subject to special requirements for certain
Holiday calendar
types of offshore loans.
Date Event
Offshore-offshore 2008 1 Jan New Year’s day
10 Jan Islamic New Year
The offshore market is limited to the NDF 7 Feb Chinese New Year
7 Mar Saka New Year
market. 20 Mar Prophet Muhammad’s Birthday
21 Mar Good Friday
Repatriation 1 May Ascension Day of Jesus
20 May Waisak day
Capital inflows are subject to approval, 30 Jul Ascension of The Prophet
Muhammad
whereas there are no restrictions or limitations 18 Aug Independence day
on repatriation. 1-2 Oct Idul Fitri
8 Dec Idul Adha
Taxation8 25 Dec
29 Dec
Christmas
Islamic New Year
Note: Holidays are dependent on the Muslim Lunar Calendar and may differ from the date
The majority of foreign investment in given
Source: HSBC, Bloomberg
Indonesia is supervised by the Investment Co-
ordination Board, Baden Koodinasi
Information sources
Penanaman Modal (BKPM). Some industries
Bank Indonesia www.bi.go.id
are considered off-limits to foreign investors, Bloomberg Fixing page APF1<go>
while some require special approval. Reuters Fixing page ABSIRFIX01
Investments that are considered to be in the
national interest are generally encouraged. At
present, foreigners are not yet allowed 100%
ownership of most businesses, although this
will change if pending legislation is passed.
Indonesia offers several industry-specific
incentives and regional incentives, mostly
geared towards the development of the outer
islands.
8
HSBC is not qualified to give tax and legal advice. Specific tax and
legal questions should be directed to your appropriate advisor.
25

27. Macro
Currencies abc
December 2007
Malaysian ringgit (MYR)
The Bank Negara Malaysia (BNM), Malaysia’s central bank,
maintains the MYR in a managed float
The MYR is not convertible outside of Malaysia
The central bank monitors the exchange rate against a currency
basket to ensure that the exchange rate remains close to its fair
value
HSBC Bank Malaysia Berhad, a wholly owned Options
subsidiary of HSBC Holdings plc, is a licensed The onshore USD/MYR currency options market
onshore bank and authorised dealer in Malaysia. is gaining popularity, following the de-peg of the
HSBC offers the following products through its MYR. HSBC Bank Malaysia Berhad is a leading
onshore bank. player offering structured zero cost USD/MYR
FX options. HSBC also offers solutions based on
Onshore spot FX and forwards
exotic FX option structures to its clients to
FX options – ringgit and other currency pairs manage their FX risks.
Structured derivatives and investments Normal market conditions
MYR fixed income securities Normal market conditions
Onshore average daily volume USD500-800m
Interest rate swaps and options (IRS and IRO) Onshore spot transaction Via brokers: USD3m
Via Reuters :USD5m
Onshore bid/ask spread 20–30 pips (0.0020 – 0.0030 MYR)
Forward rate agreements Onshore forward transaction USD50 - 100m
Onshore forward spread 1-6M: 3 to 20pips
Wealth management products (0.0003-0.0020 MYR)
Onshore implied option vol spread 0.4 vol for all dates
Spot Note: Spreads are subject to change with market developments
Source: HSBC
Offshore entities may access the onshore spot or
forward market for hedging MYR investments. FX framework
Forwards/FX swaps Exchange rate mechanism
A local forward market is available in USD/MYR The MYR operates in a managed float with its
and major currency pairs. Liquidity is ample up to value being determined by economic
6 months. Forward quotes beyond 6 months are fundamentals. Bank Negara Malaysia (BNM),
readily available, though they are less frequently Malaysia’s central bank, monitors the
traded. exchange rate against a currency basket to
26