Asian reserve managers navigate increasingly complex risks

RESERVE asset management in Asian economies is becoming more and more complex.

There has been a marked shift in the reserve currency asset markets over the last year. Central bankers in developed markets have moved from policy normalisation to an easing bias mainly due to macro-economic risks. This has resulted in a downward trend in yield curves of traditional reserve assets, and some asset markets have even sunk deeper into negative yield territory. The stock of negative yielding debt has doubled globally to US$17 trillion as at August 2019 from US$8 trillion as at December 2018.

The US Treasury market is one the last remaining positive yielding traditional reserve asset markets. Given this environment, reserve managers have ventured into "riskier" asset classes, including equities, exchange traded funds, corporate credits, and commodities for greater diversification and expected returns.