Central banks continue to allocate to RMB

A third of participants at the UBS-AM 25th Annual Reserve Management survey expects the RMB to become a leading reserve currency.

30 Jun 2019

For 25 years, UBS has hosted our flagship Reserve Management Seminar and along with that, conducted a survey on sovereign investors reserve management practices. This seminar is the longest running event in the industry and the data from the survey is among the most authoritative depictions of official reserve management activities available.

What are some of the key findings?

  1. The 2008-09 global financial crisis was the most impactful event over the last 25 years. The financial crisis triggered an unprecedented policy response from central banks in advanced economies.
  2. The second most voted development was the diversification of reserves away from governments bonds. Since equities first appeared in the RMS survey in 2003 , the number of respondents that indicated that equities are now an eligible asset class at their institution reached a record high of 39% this year.
  3. The introduction of the Euro was also mentioned among the top developments of the last 25 years.
  4. In terms of the next 25 years, the majority of survey participants thinks that the USD will remain the dominant reserve currency. According to a third of participants, the RMB is expected to become a leading reserve currency, at par with the USD and EUR today.
  5. About a third of respondents believe that the diversification of reserves will continue beyond listed equities and fixed income and will ultimately include certain alternative asset classes such as real estate and infrastructure.
  6. 62% of the respondents indicated a fiduciary duty towards the public as a key motivation for considering climate risk.

At this year Reserve Management Seminar, climate risk was top of the agenda for reserve banks.

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Interest in RMB to rise

Here’re snapshot from the survey on questions around reserve currency allocations

1. How do survey participants expect their currency allocations to change going forward?

Indicates the % of respondents that expect their allocations for each currency to go up or down

Source: UBS Annual Reserve Manager Survey, results as of June 2019

2. Please describe your attitude towards RMB

Source: UBS Annual Reserve Manager Survey, results as of June 2019

The average long-term target allocation (not the actual allocations) to the RMB is around 4.2% among survey participants, another significant increase from 3.2% in the previous year.

5 participants reported that they introduced the RMB this year in their reserve portfolio

The number of participants that are invested, or consider investing, in the RMB decreased slightly from high levels last year

RMB’s march to reserve management status

UBS Asset Management believe the RMB's march to reserve currency status is on course and will accelerate with the gradual opening up of its domestic bond market.

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