The outlook for 2014 was top topic for this week’s editorial meeting. And while the issue’s final lineup is evolving, here are some early candidates for the outlook issue that will come out in January.
China & the RMB
IT will take a look at the evolving business and banking climate in China and what 2014 has in store. Chinese financial regulatory bodies, SAFE (State Administration of Foreign Exchange) and the PBOC (People’s Bank of China), have been testing several schemes where currency can cross the border for both incoming and outgoing transactions. Why? First, it is common knowledge that China wants the RMB to become more of a globally accepted and utilized currency and ultimately a reserve currency and has been pushing the currency in that direction. And the world has responded: according to SWIFT, RMB is the twelfth most-traded currency in the world. And just recently, SWIFT reported, the currency is now the second-most-used currency in trade finance, overtaking the euro. Indeed, SWIFT’s RMB Tracker recently showed that the RMB now has a share of 8.66 percent in trade finance in October 2013.
Secondly, China wants Shanghai to evolve toward becoming a global financial center on par with New York, London, Hong Kong and Singapore. With this in mind China recently launched its pilot Shanghai Free Trade Zone program, which it hopes will create a new financial services hub. Overall, China is looking to overhaul its financial sector so consumers can get better returns at banks and invest overseas, and smaller Chinese firms get more access to loans.
Finally, China wants to be the location of choice for Asia-based regional treasury centers (RTCs). Many companies such as Ford, GM, P&G and Cargill have substantial treasury operations already based in China but many others are evaluating where to set up an RTC as their business seeks to expand in the region. In the current state, Singapore and Hong Kong often win out as the best location. However, given the growing importance of China for western businesses, RTCs based there would make good sense provided the business needs can be met.
Where to put cash
Money market funds remain under pressure from regulators with threats of imposing a number of rules including applying a variable net asset value (VNAV) regime vs. its current stable NAV. We’ll take a look at the state of those proceedings and the outlook on where companies should be putting their cash. And while it appears for the most part MMFs will likely survive in some shape or form despite new regulations, it hasn’t stopped other players from entering the race for the cash building up on corporate balance sheets. IT will take a look at some of the new entrants, including BlackRock and Legg Mason’s Western Asset Management, which earlier this year announced the launch of new products that will have the look and feel of an MMF. Other players include PIMCO, Barclays and Guggenheim Investments, all of which are promoting their short-duration bond exchange-traded funds (ETFs). These could be attractive for their cheap, safe and liquid qualities.
Still another destination for cash is StoneCastle Cash Management’s Federally Insured Cash Account (FICA). Although not quite very short-term, it’s a cash management program that offers weekly liquidity, a competitive yield and most importantly, a high level of FDIC insurance. This it offers by way of slicing up investments and distributing the cash in $250,000 increments to community banks around the US.
Bank relationships
At a fall NeuGroup Assistant Treasurers’ Peer Group meeting, members tackled bank relationships. One specific discussion surrounded the use of scorecards and share of wallet analysis to effectively manage those relationships. In looking ahead, IT will further explore the use of scorecards and also look at other aspects of banking relationships, including bank consolidation strategies and how these management tools play a role in those sometimes difficult decisions, the question of sharing the data with the banks and the role of credit.