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The treasury industry continued its robust performance in 2003 with revenues remaining stable in 2003 on the back of increased trading volume.
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Treasury revenues increased over 2% to S$4.5 billion in 2003 while trading volumes increased almost 21% to an average daily turnover of US$168
billion1.
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Foreign exchange, interest rates and debt activities continued to be major drivers of trading volume.
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In response to growing market activity, financial institutions increased their manpower in 2003 and have indicated they will continue to hire through 2004.
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Treasury revenues increased over 2% to S$4.5 billion in 2003 (refer to
Chart
1).
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Foreign exchange generated 42% of total revenue while fixed income and interest rate activity accounted for 54% of total revenue. This is consistent with the increasingly structured nature of the credit business over the last year with greater demand for higher yield amidst a low interest rate environment.
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For the fourth year in a row, average daily trading volumes of treasury activities have risen. 2003 exhibited a high of US$168 billion; a 20.8% increase over 2002 and the largest year-on-year increase over the four-year period (refer to
Chart
2).
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In line with historical performance, foreign exchange activity continued to dominate trading activity, making up 71% of trading volume. Trading volumes in fixed income and interest rate activities also remained strong, accounting for 28% of total volume.
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The level of foreign exchange activity rose 24% after a few years of stability, recording an average daily trading volume of US$119.3 billion (refer to
Chart
3).
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The growth in foreign exchange transactions is in line with the global trend of investors to capture value from alternative sources. The FX market, increasingly considered to be a distinct asset class, was a major source of volume and revenues in 2003.
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Activity was boosted by heightened volatility in international exchange rates as a result of various factors including the downtrend in US dollars, the Iraq war, surging oil prices and the SARS outbreak.
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Costs of treasury activities grew 11% from $1.23 billion to $1.37 billion. (refer to
Chart
4).
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In line with the strong performance in the industry, the number of treasury staff continued to rise 4.5%, from 3,673 in 2002 to 3,840 in 2003 (refer to
Chart
5).
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83% of these staff are professionals, out of which 50% were engaged in sales and trading with the rest specializing in risk management and middle-office functions.
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Financial institutions have indicated that they will continue to hire through 2004. This is a reflection of the continued confidence in the market and growth of the industry.
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1 Time Deposits have been excluded from survey.
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Charts.....
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Source: Financial Centre
Development Department, Monetary Authority of
Singapore 29 Sep 2004
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Survey of Singapore Treasury Activities 2003
