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Wednesday, 6 March 2013

So much cash rotting in the banks. Next Big Bear when???

Cash is not king when it comes to investment
All the cash - $528 billion at the end of January - is earning next to nothing sitting in the banks,
Mr Tan: Dilemma facing many investors - investments at a standstill but goals remain the same

WITH their judgments clouded by a flawed assessment of risk and return, retail investors who opt for the safety of cash will experience an erosion of their purchasing power and deprive themselves of a chance to participate in a potential increase in wealth, said William Tan, Franklin Templeton's director of retail fund distribution for South-east Asia.

There was $519 billion in cash sitting in Singapore banks as at end-December last year. This rose to $528 billion at the end of January 2013. "If you stack that amount in $100 bills, the height will be two-and-a-half times that of the Singapore Flyer," he said.

All this cash is earning next to nothing in the banks. "This is the dilemma facing many investors - their investments are at a standstill but their investment goals remain the same," noted Mr Tan at a media conference this week entitled "Time to take stock".
According to data compiled by Morningstar, investors have been taking funds out of Asian equity mutual funds in each of the past five years. In total, some US$113 billion (S$141 billion) has been withdrawn from the funds.


With so much cash rotting in the banks, market downside may be limited as these rotting cash must be deployed.

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