The definition of cash, while ostensibly straightforward – banknotes and coins – becomes increasingly challenging when the demands for higher returns counteracts the obligation to ensure adequate liquidity and the commitment to avoid losses.
The market mood has changed dramatically over the last six months. The risk-off sentiment that dominated in late 2018 has very much been replaced by a risk-on attitude in 2019, mainly in response to the recent dovish shift in Federal Reserve policy.
Singapore’s de facto central bank, the Monetary Authority of Singapore (MAS), will hold its semi-annual monetary policy meeting in mid-April. Given the recent rapid changes in the global and regional economic outlook, market consensus for future policy direction remains divergent – but both the MAS’s actions and words could have significant implications for Singapore dollar cash investors.
After a decade of anaemic returns, cash rates moved decisively higher in 2018 – at least in the US. Three-month Treasury yields pushed through the 2% mark, while dollar money market yields actually rose above the yield available from many broader fixed income benchmarks.
What can Chinese money market fund investors expect for 2019?
China is experiencing a broad economic slowdown. GDP growth fell to a 28-year low of 6.4% year on year in the fourth quarter of 2018, as weaker domestic demand combined with escalating trade tensions to weigh on business and consumer sentiment. The strong fiscal and monetary policy response from the Chinese authorities to this slowdown should help to support growth, but will also have a significant impact on cash investment options and cash returns in 2019.
2018 ended with investors very much in risk-off mode. Markets wilted under pressure from several headwinds, including concerns about trade wars, a US recession, a global slowdown, Brexit, Italian fiscal policy, French fuel protests, leverage in the credit markets and deteriorating market liquidity.