Yuan correction not raising hedging alarm

[SINGAPORE] The recent slide in the yuan against the US dollar could offer some pause to investors in yuan-based structured products, a growing, billion-dollar market that has been fuelled by single-minded bets on yuan appreciation in the long term.

But this price correction has not pushed concerns of large hedging losses to the fore yet. There is little evidence that corporate clients are speculating, and most of them are using straightforward hedging instruments, banks told The Business Times.

What has been noted is the hive of activity in the market for structured FX products - estimated at US$150 billion in outstanding volume - that effectively places bets on yuan appreciation, said Adam Gilmour, head of corporate sales and structuring in Asia Pacific, Citi Global Markets.