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Why HSBC Liquidity Investment Solutions?
Reasonable planning of cash flow and improving financial benefits have always been important parts of corporate finance management. HSBC Liquidity Investment Solutions (LIS) provide corporates with the money market fund distribution service via digital channels. This in turn helps corporates better respond to various changes in the financial market, as well as realise the preservation and appreciation of funding.
“HSBC’s fund distribution platform offers us a convenient channel to invest in money market funds, so as to enhance the yield of our surplus cash. Another advantage is that after enabling the online function, our treasury team can do transactions for several entities within the group on this electronic platform, with no need to switch between entities or users, which helps to improve efficiency.” says Kris Lin, Senior Director, Finance Department of Daiichi Sankyo (China).
As an original research multinational group with a history stretching back more than 120 years, Daiichi Sankyo began to introduce many excellent original researched products to China in the 1980s. And has since continued to expand its business in China. With business booming, the company now faces a significant inflow and outflow every day, so the first priority of its treasury team is proper planning of cash flow. For surplus funding, a solution that can not only improve relative capital income, but also have higher liquidity, is required. At the same time, a simple operation is also very important in contributing to increase operational efficiencies within the treasury team.
In 2019, with support from the HSBC China Global Banking team, Daiichi Sankyo (China) started to use the LIS service, and has since improved financial benefits and efficiencies. In 2023, another entity under Daiichi Sankyo (China) also applied for the digital fund distribution platform, which further improved the efficiency of the group’s cash management.
HSBC LIS enables both online and offline channels for money market fund transactions. Currently, there are two Fitch 3A rated money market funds (MMF) available on the platform, whose benchmarks are shown in the Fund Prospectus as “7-day call deposit rate (after tax) for the same period”. The two funds also offer T+1 redemption settlement, which provides a good balance between risk, yield, and liquidity.
Additional advantages of HSBC LIS also include:
- Regardless of whether the company subscribes into MMF via online or offline under LIS, HSBC as the fund distributor will transfer the subscription amount from the company’s bank account to the fund house thus, providing operational efficiency for finance and treasury teams.
- HSBC’s online platform is a one-to-many platform, meaning one user can handle transactions for several entities within the group, as well as access various MMFs from different fund houses. It is specifically designed for scenarios where treasury teams centrally manage cash flow for the whole group.
- LIS also offers a rule-based sweeping service which automatically triggers subscription and redemptions according to investment rules pre-set by the company, including selected fund(s), target balance amount, max/min investment amounts, investment frequency, investment day and investment periods. This can reduce manual interventions and help the automation of cash management.
Since March 2022, the Federal Reserve has adopted continuous interest rate hikes, which affected the global financial market. In 2023, local commercial banks in China have generally lowered interest rates for 7-day call deposits and contract deposits. In this case, money market funds are becoming one of the solutions that corporates are seeking. In addition, according to local regulation, MMF dividends are corporate income tax exempt (tax rate 25%) for the time being.*
Currently, more than 55 corporates have adopted HSBC LIS to invest in money market funds via our online platform. The total investment balance at end of Dec 2023 is around CNY 6.8b.
For any questions on HSBC Liquidity Investment Solutions (LIS), please contact your HSBC relationship manager.
* HSBC does not provide any tax advice to clients.
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