HSBC Dual Currency Investment Account - opinions?

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I'm banking with HSBC and they've proposed this 'Dual Currency Investment Account' to me. Has anyone heard of it, or used it before?
I transfer EUR to MYR every month for living expenses. The banks in-house exchange rates are poor (not just at HSBC) and you'd do far better with cash at a money changers (just not a practical option).

The Dual Currency Investment vehicle seems very interesting for anyone in this situation (most people here?). It allows you to obtain a far better exchange rate, or if not a higher exchange rate at least a better interest rate on your foreign currency account. The details are all here: http://www.hsbc.com.my/1/2/personal-banking/investments/dual-currency#top

I'm trying to figure out a downside to this deal, but I can't really see one. I either get my EUR changed to MYR at a better than regular bank rate, or I get it refunded to me with up to 9% interest if the target exchange rate isn't met.

Anybody tried it yet?

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hi,

CIMB have a similar product, and I suppose most other other banks do as well. If you're planning to change money then you can bet on the direction of the exchange rate with a higher interest rate for longer periods or wider spread.

I was looking into this recently and also couldn't see a downside.

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I suspect the downside may lie in the Tariffs and Charges section.  I had a quick look through but it's the usual HSBC gobbledegook.  HSBC are usually quite inventive with their charges I have found in the past.  Does this fall under Generic accounts or Foreign Currency Accounts - either way, some hefty charges I think.

DBS in Singapore have been trying to get us to do some similar scheme with them and whenever we ask about fees, it all goes rather quiet.  There's no free lunch.

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Isn't there a minimum balance you have to maintain each month? Otherwise, there is a fee? A personal banker was trying to get me to open such an investment account as well (not sure if it is the same product). It sounds too simple and too good to be true. It's almost like share. You trade in your dollar for ringgit when the rate is good and right for you.

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Hi
I've done that a few times with HSBC - not with a constant account but on a case to case base whenever I was planning to change EUR to MYR. So far it always worked perfect, no charges at all....
You get what you signed up for - exchange rate is fixed within the 10 seconds window when you are closing the deal and thats it... Either it stays in MYR and you get the interest amount, which is clearly stated or you get it converted at the exchange rate you signed up for and the amount for that is also clearly stated... No charges - the bank profit is in the buying and selling.... every deal in one direction have a counterdeal in the other direction and the gab in between covers the banks profit....
And the exchange rate is not only better than the "normal" rate... its better than the mony changers, too.... at least at the time you close the deal...

Udo

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Hi All.
Yes, I too thought 'where's the catch - it must be in hidden charges'. But my HSBC manager (with whom I'm quite friendly and trust quite well) assured me there are NO charges.

Thanks for your post Udoc, because it confirms what I was told.

There is ONE catch that I've found. The minimum transaction is 250K MYR....which is too much for me to move in one go.
But there is a workaround.
If you sign a form declaring you have a net worth of 3M MYR or over  then the limit is reduced. I'm waiting on the specifics on that minimum figure, but I believe it's around 50K MYR. Perhaps Udoc can confirm this.

Apparently the Financial Regulator here considers this a Risky structured investment (I've even seen it referred to as a 'derivative'  ) and they've put the restrictions on it. Quite why betting 250K instead of 25K is considered a safer idea just confounds me. Possibly some oblique logic that if you are moving such a large figure (or have 3M bucks) you must be financially savvy enough to understand the risks - and for a Malaysian ringgit holder betting on foreign currency for pure speculation purposes, I guess this could carry risk!
But for a foreign national, with foreign currency, which MUST be changed AT SOME POINT to MYR - it seems a no brainer. 

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Hi Starbuck

there was no restriction with my HSBC manager here at Penang and the min amount was around 20K (if I still got the figure right in mind - will check it after Germany is out (or in)) 

have to hit back to the screen...

Ciao
Udo

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Udoc, my manager says the minimum is 50K MYR.

Commiserations about Germany. They were my second favourite after Brazil.

I hope the Dutch win now.

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Call HSBC Penang and ask for Yee Ling... min amount is 10.000 EUR means around 40K

Ciao
Udo

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UdoC's post of the 07 July 2010 is spot on.

I have been doing this with Sterling since it got a bit sickly, just to get a few more 'bangs for my buck'!

As my 'income' currency is Sterling, I have a sterling account with HSBC here in KL, and the minimum transaction amount is £9,000.

I only ever 'fix' for a week & the only catch is if you 'fix' at a rate when you believe it won't convert (& this rate always pays the lowest level of interest), and it converts, so then you have RM45,000 which you may not need for a month or two, and by the time that month or two has passed Sterling may have strengthened, and you would have got a better exchange rate just doing a bog standard conversion!!!!

However as most people are saying, you need to convert a regular amount of Euros, USD , Sterling or whatever anyway, it is a no brainer!

 

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Hi Fizzy. Yep, I figured that could be the downside. So strategies need to be a combination of:

a) How much money you need to convert and how quickly.

plus

b) What way the Forex rate for the currency pair is moving (short and long term).

When you say you only ever fix for a week - what's your thinking behind that?
I mean, if the market is flat, or moving in a direction where the conversion won't be likely to happen, why not strike some really unrealistic rate and leave it to gather interest before maturing in a month (or more) and being paid right back in original currency?

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When you say you only ever fix for a week - what's your thinking behind that?

Hi Starbuck,

Good question, no real reason, other than

a) I quit long term investments/transactions quite some time ago, and no longer am interested in the advice of 'Investment Experts', who always say 'Look at the long term' when your investments with them is at  rock bottom!

b) I tend to do 'Term Trades' shortly before I need Ringgit, & I don't sway too far from 'the spot rate'; that way I get a decent return if it doesn't convert!

However you have prompted me to have a look at a longer term option, especially as I shall be away for the best part of the next 2 months!

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The cost is currency exchange is around half the spread. The typical MYR/USD spread is around 2%. In addition, you are likely to get an unfavorable rate, but you will never know it since you will not know the real-time prices at the time the transaction takes place. I estimate the MYR/USD cost is something like 1.5%. So if take your US$500,000 and buy MYR (for example, to buy property), and then some time later, sell your MRY for US$500,000 (for example, leaving Malaysia), the total cost would be 3%, or US$30,000. For currencies other than USD, spreads are even higher. This is enormous profit for the banks.

If you want to know the cost of HSBC Dual Currency Investment, check the spreads!

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sell your MRY for US$500,000 (for example, leaving Malaysia), the total cost would be 3%, or US$30,000

Total cost US$30,000. ain't that 6%?