HSBC 2008 Annual Report Download - page 400

HSBC HOLDINGS PLC
Notes on the Financial Statements (continued)
Notes 17 and 18
398
Treasury
and other
eligible bills
Debt
securities
Equity
securities Total
US$m US$m US$m US$m
Fair value at 31 December 2008
Listed on a recognised exchange1 ................................ 80 3,490 8,140 11,710
Unlisted ......................................................................... 155 12,859 2,853 15,867
235 16,349 10,993 27,577
Fair value at 31 December 2007
Listed on a recognised exchange1 ................................ 50 8,659 15,449 24,158
Unlisted ......................................................................... 131 12,491 4,598 17,220
181 21,150 20,047 41,378
1 Included within listed investments are US$576 million of investments listed in Hong Kong (2007: US$1,502 million).
18 Derivatives
Fair values of derivatives by product contract type held by HSBC
Assets Liabilities
Trading Hedging Total Trading Hedging Total
US$m US$m US$m US$m US$m US$m
At 31 December 2008
Foreign exchange ................................................ 115,803 2,010 117,813 115,311 826 116,137
Interest rate ......................................................... 259,672 4,481 264,153 252,131 4,435 256,566
Equities ............................................................... 18,660 – 18,660 21,913 – 21,913
Credit derivatives ................................................ 91,271 – 91,271 89,715 – 89,715
Commodity and other ......................................... 2,979 – 2,979 2,729 – 2,729
Total fair values .................................................. 488,385 6,491 494,876 481,799 5,261 487,060
At 31 December 2007
Foreign exchange ................................................ 52,018 3,490 55,508 50,608 371 50,979
Interest rate ......................................................... 83,982 1,759 85,741 83,374 2,013 85,387
Equities ............................................................... 20,229 1 20,230 19,458 – 19,458
Credit derivatives ................................................ 25,268 – 25,268 26,247 – 26,247
Commodity and other ......................................... 1,107 – 1,107 1,322 – 1,322
Total fair values .................................................. 182,604 5,250 187,854 181,009 2,384 183,393
The 163 per cent increase in the fair value of derivative assets during 2008 was driven by increased volatility and
movement in yield curves, foreign exchange rates and credit spreads. The increase in the notional contract amounts of
HSBC’s derivative assets in the year was only 8 per cent. However, IFRSs only permit netting of assets and liabilities
with the same counterparty in very limited circumstances, even when there are contractually agreed netting
arrangements in place.
Fair values of derivatives by product contract type held by HSBC Holdings with subsidiaries
2008 2007
Trading Trading Trading Trading
assets liabilities assets liabilities
US$m US$m US$m US$m
Foreign exchange .......................................................... 1,772 1,324 2,381 2
Interest rate ................................................................... 1,910 – 279 42
Total fair values ............................................................ 3,682 1,324 2,660 44
Derivatives are financial instruments that derive their value from the price of underlying items such as equities,
bonds, interest rates, foreign exchange, credit spreads, commodities and equity or other indices. Derivatives enable
users to increase, reduce or alter exposure to credit or market risks. HSBC makes markets in derivatives for its
customers and uses derivatives to manage its exposure to credit and market risks.