Posted by
ET69
15 yrs ago
I'm a private investor moving to HK, and need to move some assets (probably $1MM to $2MM USD in the first transaction) from USD to HKD.
I stopped in to a few of the retail banks and brokerage offices, and was shocked by what I consider to be exorbitant FX spreads - often in the 15-20bps+ range. The little money changer guys on the street corners offer tighter spreads than that!
I know that are lots of Finance-savvy expats out there. Can anyone recommend a bank with more competitive FX spreads? The transaction is basically that I would wire them the USD and have them TT the HKD to another HK bank account. I was expecting to pay a few bps for this, not 15! Surely there must be some more competitive banks out there?
Thanks in advance,
ET
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I haven't used HSBC's service myself but they've been promoting their "premier" account services. Maybe you could look into that.
Basically what you would need to do is open a premier account in the US and let them help you open an account here in Hong Kong. Transferring moneys between accounts will then just need a Telex fee of about 180HK$ for any amount using the current exchange rate between the two currencies. Too good to be true? Maybe. Please do share with us your experience when your txn is done.
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ET69
15 yrs ago
>Too good to be true? Maybe.
Not maybe, definitely. HSBC Premier's FX bid-ask spread is anything but attractive. Even less so than HSBC Brokerage. The Premier reps will swear up and down that there is "no charge whatsoever", but that's just their ignorance showing through. While there is no transaction fee, there is an absurd spread of about 20bps. HSBC Brokerage is a little better at about 10 - 15bps.
Erik
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How about openning a US dollar account with them, transfer your US$ from the US to Hong Kong, and when cleared in Hong Kong convert it to HK$ (some other way)? This way you're just paying the telex fee of HK$180 (I think).
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LaBob
15 yrs ago
20pips in 1 mio USD/HKD is only 255 USD. which is nothing compare to your asset ;)
I think best way just to open an interactivebroker account in where ever you are living right now, and just fund your account with USD, then do a FX transaction on IB (they normally do it 1 pip below the market) and then transfer your HKD out to the bank of your choice.... but it is still hard to imagine someone with 1-2 USD in asset would be worrying about 20 pips in USDHKD (which equals 2 pips in USD/JPY...)...ha
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ET69
15 yrs ago
20bps (not pips; I know what pips are but was quoting the spread in bps) on $1mm is $2,000 USD, and the $1-$2mm was only the first transaction. The total cost of all planned transactions at that spread would have exceeded $10kUS/$80k HK. No thanks.
I've looked into the scenario you described, but most of the online FX guys aren't really exchanging currencies. They deal in currency pairs effectively as derivatives on the exchange rates. They only pay out your gain or loss in the same currency you entered the trade with. They (or at least the 3 providers I talked to) cannot accommodate true currency exchanges.
As for your comments about not being able to imagine someone with significant assets caring about transaction costs, I appreciate that your comments are well meaning, but I would humbly suggest that if you want some day to have substantial assets yourself, you would be well served to stop thinking that way. Most people are dumbfounded that wealthy people seem so stingy. But that's how we got to be wealthy in the first place! :-)
Thanks for the suggestions.
ET
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LaBob
15 yrs ago
come on, why so serious? are all rich people so tense? ok 20bp(i'm blind, sorry for misreading) is too much for transaction cost. Interactive broker is not spread shop, they are real brokers which does stocks options ect, bascially does all the stuff prime brokers do, only cater to retail. just trying to share some experience and have a laugh;)
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ET69
15 yrs ago
I didn't mean to come across as "serious"... Maybe I interpreted your earlier comment as "serious" when it was in jest, who knows. Funny how we all take ourselves and one another too seriously sometimes.
I'll check out interactive brokers just for good measure, but so far I've found that all the guys offering "Forex trading" are really dealing in currency pairs, not in actual excahnges between currencies. I'll check it out though.
Hey, at least you knew what a basis point was... The guy at the HSBC Premier centre was confused by the term. No, I'm not kidding.
ET
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ET69
15 yrs ago
Hey LaBob,
Thanks man!!! I was skeptical but you called it right re: Interactive Brokers. And thankfully, they (like you) were good enough to quote the spread in pips - only 2 pips in this case.
I'll open an account with them, fund it from New York in USD, and withdraw the HKD here. Unfortunately they don't offer segregated CIES accounts, so looks like I'll have to deal with HSBC for that.
Thanks again!
ET
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LaBob
15 yrs ago
glad it helps. ;) IB is very good. act like your personal back office. only thing got people scared a while back is that their custodian back is citibank...got me worried when C was below 1 haha... but their deposit has some kind of insurance built in (FDIC? not sure)
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ET69
15 yrs ago
Well it looks like I spoke a little too quickly. IB does seem to offer an excellent solution, but they refuse to do any transaction in size (limit is $50k) without a "security device", which I assume means an encryption fob. No objection so far, but then they told me it would take 3 weeks for them to send me such a device.
The Hong Kong office said sorry, nothing we can do. I e-mailed their compliance dept to see if they can come up with a workaround, but I need to fund the CIES account sooner than that.
The joys of international banking... :-)
ET
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LaBob
15 yrs ago
20bp vs 3 weeks ;) good luck
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ET, I use DBS.
DBS FX rates beat HSBC, Hang Seng, BOC, BEA and Wing Hang.
HSBC
http://www.hsbc.com.hk/1/2/hk/investments/mkt-info/fcy/rates
DBS
https://hk.dbs.com/ecPortalWeb/Rates/ExchangeRate.AXD?nls=en-us
If you are converting more than HK$500,000, you can open a DBS Treasures Priority Account (no monthly fee) and the FX rate will be better than what is listed in the link above (i.e. better than DBS usual FX rates). You will however have to call the Treasures hotline and execute the trade through the phone.
As far as I know, IB does not wire money to you other than in the base currency of your account.
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Correction - IB's website states that deposits and withdrawals may be made in any non-base currency in AUD, CAD, CHF, EUR, GBP, HKD, JPY, MXN, SEK or USD.
http://www.interactivebrokers.com/en/accounts/universalAccount.php?ib_entity=llc
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ET69
15 yrs ago
Hi sghkcn,
Thanks for the advice, but sadly I have called DBS on 4 occasions, identified myself as a high net-worth investor, and asked to speak to someone about opening a new account. I have yet to receive the courtesy of a return phone call in response to any of my 4 inquiries, so I gave up.
LaBob's suggestion has been saving the day, though. Although the HK offices of IB have not impressed me at all, I had no trouble negotiating a "streamlined" new account process with their new accounts people in New York, and I expect to have trading authorization on my account by the end of this week. IB quoted me a USD/HKD spread of 7.7506-7.7507, i.e. only 1 pip on transactions over US $25k, which is fantastic.
I had your same concern - that IB would not wire money in a currency other than your base currency, but they have since assured me it's no problem. I'll believe it when the transaction is actually completed, but that's what they are saying so far.
ET
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