While Switzerland’s removal of its currency’s peg to the euro decimated many forex brokers in London and New York, one leading broker in Abu Dhabi said it does not expect the crisis to last very long.
Philippe Ghanem, the managing director of ADS Securities, also said the firm has come out unscathed because it was able to avoid margin calls even as the Swiss franc surged against every currency on Earth last week.
He says the crisis is likely to be short-lived and probably will not have a wider impact on the global economy, which is already suffering from the risks of deflation amid a sharp drop in the price of oil.
In the Gulf region, he said, it’s unlikely to have any effect as few countries have significant dealings with the Swiss franc. The likeliest impact will be that imported goods such as Swiss watches may become temporarily more expensive, Mr Ghanem said.
“I don’t see it lasting for very long in my opinion,” he said. “And don’t think it will hurt the industry much in the long term. I think lowering the interest, going into negative interest for the Swiss and doing some small interventions will lower the volatility on the Swiss franc and gradually allow the dollar to pick up against the Swiss franc.”
The Swiss National Bank’s decision last week to end its three-year policy of capping the franc at 1.20 a euro triggered losses in the hundreds of millions of dollars at banks including Citigroup, Deutsche Bank and Barclays as well as hedge funds and mutual funds.
The franc surged as much as 41 per cent versus the euro on January 15, the biggest gain on record, and climbed more than 15 per cent against all of the more than 150 currencies tracked by Bloomberg.
And many observers predict the fall out money wise will grow as more losses are revealed.
Yesterday the Swiss franc was around 2 per cent lower against the euro in afternoon trade.
ADS Securities said yesterday that its UK affliliate, ADS Securities London, is among the first forex brokerages to increase its capitalisation since the crisis began. It said, without giving any figures, that it would double its capital with money from its parent company ADS Holding.
ADS Securities was established in 2011 with $400 million in capital to attract customers seeking to trade between the closing of markets in Europe and the opening of markets in Asia.
“Last year we doubled our revenues and we have a new office in London, new office Singapore,” said Mr Ghanem. “We’ve grown.”
mkassem@thenational.ae
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