Looking with hindsight from a December perspective, economies in Asia this year have turned out tremendously differently than almost anyone expected.
After investment banking started out in the doldrums in January, 2009 has turned into a banner year for IPOs and Asia has dominated the global market. Recent IPOs for China Minsheng Banking, Maxis and Las Vegas Sands Macau, among others, propelled Asia to nearly half of the money raised so far this year.
Currency traders who expected a year of continuing dollar increases amid a crisis have been surprised too and may also have had a stellar year. Whether it’s due to the carry trade boosting currencies – and creating a potential bubble – or fears about the high US deficit and potential inflation or other factors, the US dollar has sunk back to levels few expected.
From IPOs and stronger currencies to a growing market in yuan-denominated private equity funds and more, then, 2009 has turned into a year of positive surprises. Yet that’s not to say that clouds don’t still lurk on the horizon.
Even though banks in Asia appear little exposed to the turmoil in Dubai, for example, the delay in payments by Dubai Holdings may have more of an impact on Asia than expected. Malaysia reportedly has more than a 50% share of Islamic bonds (sukuk) and a default by Dubai could put a tremendous dent in this growth for these countries and others targeting Islamic finance. Uncertain growth, potential currency bubbles, looming inflation and more could also make the 2010 outlook uncertain.
Amid all this volatility, what has also had a profound and long-lasting impact on treasury and finance professionals is the start of a series of paradigm shifts that have changed how business is run and that can have positive benefits for years to come.
Take electronic trading platforms, for example. While implementation of even just foreign exchange (FX) platforms was slow, corporate treasurers increasingly see electronic platforms as front-line tools for monitoring and managing all kinds of risk, while also increasing efficiency and reducing cost. Platforms for money market trading are taking off as well.
Or take netting. Whereas companies often used netting in the past to reduce cost, they’re now using it to bring greater discipline into more treasury processes. Effective cash management through netting can match and balance cash pools, keeping costs and risks down.
In a world of increased volatility, fewer counterparties, rapidly changing risk ratings, pressures on costs and higher risks, to name but a few of the changes, the increased focused on efficiency and cost and risk management is driving these and other paradigm shifts. Along with netting and electronic trading, companies are also making these paradigm shifts in market data delivery, working capital strategies and more. These are no short-term shifts. They’re longer-term transformations that will change the business and continue even as the economy improves in 2010.
When it comes to the relationship between Europe and Britain – uniformity isn’t a word that currently springs to mind. And that’s not just a reference to Brexit. Whilst the Europe and Britain do find themselves in the midst of a political break-up – their monetary policies are also showing signs of divergence.
Europe’s introduction of the General Data Protection Regulation (GDPR) next May will have implications for businesses around the world and US corporates should start getting ready if they haven’t already done so.
As anticipated, US organisations exited prime money market funds en masse following last year’s SEC reforms. AFP’s latest Liquidity Survey indicates what it will take to encourage them back.
The statement issued by the bank also suggests that fiat currencies are superior, due to their price stability.