Exchange February 2019

The February Exchange Newsletter is out now! The newsletter covers International Women’s Day events, liquidity insights from JP Morgan Asset Management, funding opportunities for women in finance and more.

The RBA’s 50/50 Conundrum

The RBA’s 50/50 Conundrum

Aidan Shevlin, CFA
Head of Asia Pacific Liquidity Fund Management
J.P. Morgan Asset Management

The Reserve Bank of Australia’s (RBA’s) overnight cash rate has been unchanged at a record low of 1.50% for a record 28-months (Exhibit 1A). Throughout 2018, the central bank’s meeting minutes and speeches suggested that rates remained appropriate — implying a broadly neutral policy stance — while hinting that the next rate movement would be higher, albeit with “no strong case for a near- term adjustment in monetary policy”(1) .

For most of 2018, forwards markets agreed with the central bank and were firmly pricing in future RBA rate hikes — but this has abruptly changed (Exhibit 1B) with the market now indicating a 50/50 chance of a rate cut in 2019. This rapid reversal could exert substantial influence on the central banks thinking with significant implications for money market and fixed income investors.

Source: Bloomberg, Reserve Bank of Australia, J.P. Morgan Asset Management; data as at 22nd January 2019.

Stuttering growth engines

Historically, Australia’s twin engine economy has been a source of strength, with the combination of commodity exports and domestic demand helping the country avoid recession for a record-breaking 27-years. In the past half-decade, as mining infrastructure investment waned, a booming housing market — with prices jumping by 45% between 2012 and 2017 – replaced it as the key driver of economic growth.

However, the factors that triggered the housing surge — low interest rates, easy bank financing, limited supply and strong foreign demand have recently faded due to a combination of new macro prudential measures, higher commercial bank mortgage rates and tighter restrictions on foreign buyers. House prices (Exhibit 2A), building permits and new home sales have all fallen sharply, with negative repercussions for retail sales and consumer confidence.

Meanwhile, the well-publicized slowdown in Chinese economic growth and rising global trade tensions have raised the specter of lower demand for key Australian commodity exports including coal, gas and iron ore.

Source: CoreLogic, J.P. Morgan Asset Management, as at 22nd Jan 2019

Consequences and conundrums

Throughout 2018, solid business sentiment, an improvement in capital expenditure intentions and a tight labor market — with strong hiring momentum and an up-tick in wage price pressures – encouraged the central bank’s belief that inflation would move higher — implying the need for future rate hikes. But weaker housing, sharply lower business sentiment and softer domestic demand are already impacting growth and are challenging the viability of the RBA’s optimistic 3.5% 2019 GDP forecast(2). The hawkish bias is also being questioned as the RBA has never hiked interest rates during a housing market downturn (Exhibit 2B).

The path of least resistance

Economic growth will likely slow in 2019, albeit from a previously robust level. However, fears of a property price crash are likely overdone: Low unemployment and low-interest rates suggest mortgage payments remain affordable and most homeowners still enjoy positive equity. Little mortgage borrowing was completed at the peak which was perceived by many as unsustainable.

Finally, even if the economy slowed faster than expected, the RBA has capacity to cut base rates if necessary and the government’s improved fiscal position has given it the ability to cut taxes or boost spending if required.

Given this backdrop, the RBA is likely to strike a more neutral tone in meeting minutes and revise down its 2019 GDP forecast while keeping base rates unchanged for the foreseeable future — further extending its record-breaking period of inertia.

For cash investors, this suggests that money market yield curves could flatten further, although the recent tight liquidity conditions represent an excellent opportunity to extend duration and lock in attractive longer tenor yields.

To read more our liquidity insights, visit www.jpmgloballiquidity.com.

(1) Reserve Bank of Australia’s December monetary policy meeting minutes as at 18th Dec 2018
(2) Source: Reserve Bank of Australia Statement On Monetary Policy, 9th Nov 2018

2019 Treasury Fraud & Controls Global Survey

2019 Treasury Fraud & Controls Global Survey

This annual survey seeks to evaluate the current and projected impact of fraud on the finance and treasury environment. Practitioners from all industries are polled on their experiences with fraud and on the range of controls, safeguards, and security practices employed to protect their financial assets and information.

Data related to bank account management and reconciliation practices is also gathered for a more comprehensive view of how various treasury operations impact security. This data is compiled annually and used to educate the industry as to how the fraud landscape is evolving, and how practitioners can better protect themselves and their organizations against attacks.

In this survey, treasury and finance professionals were asked questions on topics such as fraud experience, cyber risk management, bank account management and more. 

Considering an IPO to fuel your company’s future?

Considering an IPO to fuel your company’s future?


The landscape for initial public offerings (IPOs) continues to evolve as legislation changes and market volatility and policy issues affect IPO activity. This report by PwC looks at the trends to help you be as prepared as possible when stepping into the public arena. In this updated version of PwC’s Costs of an IPO publication, it focusses on a full range of costs associated with an IPO. While these costs can vary based on complexity of the structure, size of the company, and dollar value of the offering, there are many costs that apply across the board.

Insight into the costs of an IPO can help a company outline an IPO to the board of directors, its employees and other stakeholders. Having a realistic expectation of the costs can help improve the budgeting process, limit surprises, and reflect a well-structured IPO timeline.

This publication can help you understand the typical costs of going and being public for companies within a range of proceeds raised in the IPO, as well as for a range of the last 12 months revenues.

Funding of up to $7,000 for finance sector women available

Funding of up to $7,000 for finance sector women available

Building on the success of last year’s ‘100 Days for Change’ campaign, Women & Leadership Australia is administering an initiative to support the development of female leaders across Australia’s finance sector. The campaign is providing women with grants of between $3,000 and $7,000 to enable participation in a range of leadership development programs.

The scholarship funding is provided with the specific intent of providing powerful and effective development opportunities for finance sector women; however the funding is strictly limited and has to be allocated prior to the end of March.

Expressions of Interest
Find out more and register your interest by completing the Expression of Interest form prior to Friday, March 15 2019.

Survey: Modernising Treasury in Asia Pacific

Survey: Modernising Treasury in Asia Pacific

Best-in-class treasury departments are modernising their treasury and risk operations with the latest and greatest technology, integration and connectivity models as well as the right partners.

How are treasury departments leveraging artificial intelligence? How are treasury departments leveraging open banking APIs and real-time payments? Are treasury departments leveraging cloud-based technology and effectively managing cyber-security risks?

Take this survey to benchmark your treasury and risk management processes and receive a complimentary copy of the market study when it becomes available.

The road to real-time treasury

The road to real-time treasury


Imagine a world of real-time treasury – one where cash is sent and received in real time, and updated automatically on centralised dashboards for all stakeholders to see. 

In this whitepaper, “The road to real-time treasury”, Deutsche Bank combines recent research with Euromoney and expert views to assist corporate treasuries to plan for the future real-time world. In this future, FX conversions are carried out automatically and in real time, with hedges generated instantly to address risky exposures. Surplus funds are invested automatically according to treasury-determined preferences for risk, return and diversification, while cash-flow forecasts are generated and updated in real time – pinpointing when and how much borrowing is required.

The real time treasury is a concept that has grown in popularity over the last few years, yet it remains, in the minds of many, a long way down the road. In reality, however, the industry has made considerable progress along this road – either developing or already providing the majority of supporting services required for real-time treasury management. Though a far-flung vision to some, the real-time treasury is quickly becoming a reality.

Exchange January 2019

The January Exchange Newsletter is out now! The newsletter covers the new CFO report, conference highlights video, upcoming networking events and we welcome our new December members.

Where CFOs say Treasurers need to be more strategic

Where CFOs say Treasurers need to be more strategic 

CFOs are facing a number of difficult challenges in today’s increasingly interconnected global economy. CFO Publishing, an Argyle company, asked more than 150+ senior finance leaders in a comprehensive new survey their greatest needs from their treasurers in a comprehensive new survey. 

There were three main areas of need being risk, cash and working capital management. 

ETOS appoints new CEO

ETOS appoints new CEO

Shared by etos.co.nz

New Zealand treasury outsourcing business, ETOS has announced today (Wednesday 19th December) that Chief Executive Officer, Lesley Mitchell will hand over the reins of the business to Chief Operating Officer, Bruce Edhouse, effective from 1st January 2019.

ETOS Board chairman, Roger Kerr commented: “Lesley will continue to be actively involved in the business as a Board Member and Executive Director focused on client relationship management. However, after seven years as CEO and a total of 18 years building the ETOS brand across New Zealand and Australia, she has decided to take a step back as part of a wider lifestyle change. We are delighted that Lesley will be working to support Bruce in the on-going growth and success of the business.”

Describing the move as part of a clear, long-term succession plan, Roger commented that the search for Lesley’s successor had been ‘extensive’. Bruce Edhouse joined ETOS six months ago, on his return to New Zealand after almost twenty years overseas. He has held a wide range of international treasury roles across Asia, Europe and US and brings a great depth of expertise in the global market.

“Lesley was instrumental in Bruce’s appointment, ensuring that her successor was a good fit from a business and values perspective. Bruce has the full confidence of the Board,” said Roger Kerr. “We wish both Bruce and Lesley every success in their new roles.”

Lesley Mitchell commented: “Bruce has my full support as the right person to take ETOS through to the next stage of its development. I’m excited to be working alongside him while turning my focus to building our client relationships and the business as a whole.”