Asia-Pacific corporates mull over excess liquidity
Cash balances outstrips pre-pandemic levels, options include investment growth, deleveraging, ESG
23 Nov 2021 | The Asset

More than 90% of corporate banking clients have more liquidity than they did before the pandemic, with many of them actively evaluating their options to deploy this excess liquidity, according to a recently published survey.

The survey, by Citi, which canvased the views of its corporate banking clients, 260 of which were in the Asia-Pacific region, states that corporate cash balances of Asia-Pacific companies in the MSCI AC World Index now top US$4 trillion, the most on record, according to public data.

Among sectors, the growth in cash balances is particularly pronounced in the industrials, technology and hardware sectors in the region. Many regional corporates have also raised cost effective financing in the last 24 months to support and strengthen their balance sheets. This cash is now set to be deployed.

As the recovery in global economic growth progresses, companies in the region are projected to generate close to US$4.5 trillion in the next two years based on consensus estimates and industry data.

In their responses to where this investment would flow, almost three-quarters of the corporate bank clients surveyed cited investment growth as the highest priority, with nearly half focused on deleveraging. Environmental, social and governance (ESG) investment continues to show an upward trend at one-third, with one-quarter returning cash back for shareholder redistribution.

Most surveyed firms see ESG as an increasing focus area for their growth strategy. About half of the surveyed firms even prioritize ESG investment over increasing shareholder distributions. Those that have also made a net-zero pledge have experienced more share price appreciation and market receptivity to their ESG strategy.

Citi is working with many of these corporates to support their sustainability drive across many areas. “The scope of our sustainable effort is growing continuously and covers all client segments – from investors repositioning their portfolios towards greener industries to corporates realigning their business models through acquisitions and divestitures,” says Kaleem Rizvi, Citi’s head of Asia-Pacific corporate banking. “Our institutional commitment to building a greener future cuts across all these activities.”

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