Asia’s corporates mature and refine treasury
Asia is home to an expanding corporate base that is becoming ever more sophisticated in how it runs its treasury function.
Asia’s corporates are looking further afield for new opportunities. While the emerging and established markets of the region are providing a range of openings for companies to grow their presence and find new supply chain partners, many are exploring elsewhere.
John Laurens, head of GTS at DBS, says the region’s corporate space is changing rapidly. The biggest changes and opportunities can be found by looking at corporates poised to expand.
“The middle market is seeing a lot of growth,” he says. “Companies do not need to be MNC size to be global today. We are seeing the smaller businesses selling globally, but this means they have to be sophisticated from the very start.”
Companies do not need
to be MNC size to be global today
China is leading the way. Amol Gupte, regional head of treasury and trade solutions, Citi Asia Pacific, says: “Chinese companies are becoming smarter about using liquidity. They want to optimize their own balance sheets through pooling and intercompany lending.”
Citi has assisted an Asian petroleum company to update their treasury functions as part of a long-term programme. The bank has implemented its integrated treasury system, enabling it to reduce financial costs, improve liquidity management and enhance yields.
The growing understanding among Asia's corporates of what capabilities are available to them also comes from access to greater levels of data.
Citi has developed the data diagnostics programme to give an in-depth profile of the corporate's business. Taking three years’ worth of information, the programme analyses the internal data and external information and credit ratings. The data used is updated each quarter to keep the information within a three-year period from the current date.
“The future will be built on big data, but what’s important is how you use it to create value for clients,” says Citi's Gupte.
“We offer meaningful value to our clients by crunching and analysing their data, overlaying other important external data such as credit ratings, and then developing real-time or event-based insights that a corporate treasurer can use to quickly make informed decisions. We use our own proprietary software and analytical tools for this and constantly update the data.”
The DBS working capital advisory programme uses big data and analytics to create industry benchmarks and perform deep-dive analytics on working capital. By using the data, the bank can advise clients on how to release trapped cash and make best use of their available working capital.
The possibilities are not limited to companies within the client's own sector. There are opportunities for corporates to learn from what is being experienced by firms of an equivalent size in a different industry.
Laurens at DBS adds: “We give the clients the opportunity to benchmark their performance against their peers. They also have the chance to compare against companies outside obvious comparable industries.”
Overall, China’s continued dominance sets the pace and tone for Asia. This is underscored by the growth in use of RMB for trade finance. The banks’ own numbers are testament to its increasing influence: DBS has seen its RMB transaction turnover increase by 40% to SGD$22.2 billion equivalent.
Amol Gupte, Citi
Gupte says: “The relevance of RMB has grown over the past four years from the trade settlement perspective. It will start to eat into the market share of other currencies.” DBS has advised European pharmaceuticals group Roche on the implementation of its first automated RMB cross-border pooling structure. The company’s international cash pooling structure enables the corporate to manage 90% of its global liquidity, pooled from 50 currencies.
“We will likely see more deregulation around the capital convertibility of the RMB,” adds Gupte.
Shariah banking products are seeing a steady growth in use year-on-year in Asia. Malaysia’s Maybank has developed and expanded its product offering to meet the region’s increasing demand for Islamic banking products.
In 2014, the bank launched its Islamic liquidity concentration services, the country’s first Shariah-compliant sweeping and pooling solution. The bank picked up 11 clients in its first month of launch, and the average size of deposits increased 300% to the end of the year. The bank has seen strong demand for the products in Malaysia, and is now seeing demand spread to neighbouring countries.