Trésorier/Treasurer magazine - N°99 - Nov/Dec/Jan 2018 - 32

ARE ASIA'S
CORPORATES
READY TO REPO?

LE MAGAZINE DU TRESORIER / TREASURER MAGAZINE	-	
MAGAZINE
-
N°99 - NOV /

DEC / JAN 2018

In Europe and the U.S. the repo is
becoming increasingly popular as part
of a corporate treasurer's investment
toolkit. Will Asia follow suit?

32

A divergence in priorities and circumstances across regions means that
corporate treasurers in Asia have not yet embraced the repo market with
the same enthusiasm as their European and US-based colleagues.
But they are nevertheless very alert
to the potential need to widen their
cash investment options, according
to speakers on a panel discussion at
Euroclear's Asia Collateral Conference,
entitled 'Corporate Treasury: the integration of new market participants into
the world of repo'.
The session asked three Hong Kongbased corporate treasurers and three
bankers to chart the likely course for
greater corporate participation in the
repo markets of Asia.

Asian corporate treasurers
still feel safe
Universally, treasurers seek capital
preservation, liquidity and yield from
their short-term investment options,
typically in that order.
But unlike their western counterparts,
Asian treasurers are largely content
with outcomes across these three criteria from placing short-term deposits
with relationship banks, giving them
less incentive to explore the unfamiliar
repo market.

Shielded from the harshest impacts
of the financial crisis, Asia's corporate treasurers perceive their credit
exposure to banking counterparties as
less of a clear and present danger than
peers in Europe and US.
Panelists agreed that, not only can
bank deposits be highly tailored to
needs, but they are also very important
in the context of the broader banking
relationship.
More importantly, they cannot be
regarded as truly unsecured if firms are
placing deposits with banks that are
providing credit support.

Yield is a key factor
From a liquidity perspective, Asia's
treasurers generally have little reason
to desert cash deposits due to a healthy
current appetite by banks across the
maturity spectrum (all treasurers on
the panel had a preference for shortterm deposits, with two net borrowers),
meaning the return or rollover of cash
at the end of a term could barely be
simpler.

With the repo market offering similar
tenors to bank deposits, subject to
supply and demand, liquidity is a much
less defining factor than yield.
Unlike North American and European
corporates, Asian firms (ex-Japan),
have not faced a sustained period of
low-to-zero-to-negative interest rates.
Indeed, deposit rates are generally
attractive, with some markets experiencing significant competition.

European corporates face a different
landscape
With large cash reserves burning holes
in their pockets, it is unsurprising that
North American and European corporates have been looking for alternatives
to bank deposits and money market
Shielded from the harshest
impacts of the financial crisis,
Asia's corporate treasurers
perceive their credit exposure to
banking counterparties as less of
a clear and present danger than
peers in Europe and US.
Table des matières de la publication Trésorier/Treasurer magazine - N°99 - Nov/Dec/Jan 2018
