On the other hand, portfolio allocation behaviour has tended to normalise over the past year following the exceptionally strong preference for liquidity observed during the period of heightened economic and financial uncertainty between 2001 and mid-2003.
However, investors’ preference for liquid assets seems to have remained greater than would typically be expected at the current stage of the economic cycle, possibly due to the fact that the economic and financial uncertainties in recent years have been relatively strong and protracted. The very low level of interest rates is also fuelling private sector demand for credit.