Reflections on a Region
The past 12 months have seen the emergence of some major challenges and opportunities in every region, not least APAC. Krishna Sampath, APAC Head of Liquidity and Investment Solutions, BNP Paribas, reflects here on the main events of 2022 before looking forward to the rest of 2023.
Central bank rate rises across the globe, inflation, geopolitical uncertainties, and the ongoing effects of the pandemic still conspire to unsettle the life of many treasurers in APAC. In particular, there is a continued need to grapple with the cost of liquidity.
“Many credit-worthy businesses had built up a significant war chest of cash during the early period of the pandemic, benefitting from significant central bank injections of liquidity into the system,” notes Sampath. “But since Q1 2022, when first the US Fed, then many other central banks, started to raise interest rates aggressively, the opportunity cost of holding excess cash versus servicing debt has significantly increased.”
Globally, corporate treasurers have more than ever needed to find the balance between holding sufficient working capital, and using excess cash to pay down debt, execute share buybacks or facilitate M&As to capitalise on growth opportunities. For APAC treasurers in particular, the region’s diverse mix of highly regulated and open markets adds to this challenge, says Sampath.