Inside Sibos | Day 3
Sibos is truly a conference on global markets, and how global trade and finance flows can be best effected and grown. And as new trade patterns continue to grow, with a greater focus on emerging markets—in particular Asia—corporates in those markets are increasingly looking outward for expansion. Providing a backbone to this expansion is the corporate treasury. And corporate treasuries in Asia, and other emerging markets, are focusing on improving the core functions they manage, and also looking to create more sophisticated treasury operations in order to best support growth. Thai oil & gas powerhouse PTT, for example, recently launched a regional treasury center in Singapore and shared services center in Thailand, and plans to launch an in-house bank.
Both intra-and inter-regional trade, and also M&A, in Asia are on the rise. According to a recent EY survey, intra-regional trade in the region will hit $5 trillion by 2020. The increasing sophistication of Asian corporate treasuries to buoy the rapid development of Asian companies is a message that has been growing in resonance in recent years, and it is once again a topic of discussion at this year’s Sibos conference.
Tom Ducharme, co-head of banking, Asia-Pacific, at J.P.Morgan, says large Asian corporates are looking for two key things: “One, they want full transparency of where their cash is. Two, they are focused on creating efficiencies. They want standardization, consistency and they want to streamline.”
Another big focus area for Asian corporate treasuries is improved liquidity management, says DuCharme. “Local currency money market funds are in big demand,” he notes. With cash on balance sheet rising at companies in the region, this desire is hardly surprising. Malaysian firm Petronas, for example, has $42 billion in cash & cash equivalents on its balance sheet and came in 5th in our recent Global Cash 25 ranking of the top global cash-rich companies. The ranking included 6 Asian firms.
Although balance sheets of Asian corporates are more highly leveraged than might be the case with Western multinationals, this is in line with their growth strategy, as they look to expand both organically and via M&A. In fact, Asian M&A hit more than $370 billion in the first half of 2014, according to Thomson Reuters data. And, notes DuCharme, since the crisis Asian corporates have been improving their asset & liability matching, enhancing hedging and better managing exposures. Thus they are well prepared to match strategy to action.