Starting with early rule-based programmatic trading in the 1970s and 1980s, finance firms have long applied statistics and computing to markets. In the 1990s and 2000s, machine learning and neural networks added sophistication.

For example, hedge funds like Renaissance Technologies hired PhDs to use AI for pattern recognition. Today, we stand at a new inflexion point with generative AI and large language models that can process massive streams of text and data and even suggest novel trading ideas. As one Wharton finance expert notes, AI’s evolution “from algorithmic trading to personalised advice” has made finance “fertile ground for AI innovation.”

Applications of AI in finance

AI is now embedded in many financial processes. Broadly, AI serves in trading, analysis, and operations. In trading, automated systems place orders faster than any human can. High-frequency trading algorithms, often powered by machine learning (ML), make thousands of small trades every second to exploit tiny price discrepancies. Many of the largest trading venues are dominated by such “automated trading” in highly liquid assets. In other domains, AI systems read and summarise information.

For example, NLP tools scan newsfeeds and social media to gauge market sentiment, a process known as sentiment analysis. A sudden burst of negative tweets about a company might trigger selling by algorithms. In risk modelling and compliance, AI churns through vast data to calculate creditworthiness or portfolio risk in real time.

Advisors and insurers use AI to predict defaults or claims, while banks deploy chatbots to handle customer queries. In short, AI touches everything from trade execution to loan approvals and is effectively “democratising” access to analytics that only big institutions once had.

The influence of AI and algorithms is clearest in a few headline-grabbing episodes. In January 2021, the GameStop saga showed the power of social sentiment and automated strategies. A surge of retail traders on Reddit’s WallStreetBets sent the share price of the video-game retailer GME skyrocketing over several days.

Hedge funds that had short positions in the stock rushed to close them. Eventually, trading apps temporarily halted trading, igniting a political firestorm. Researchers note that “retail investors using the Robinhood platform” collectively drove the sharp price swing. Although that episode was driven by human coordination online, it attracted algorithmic responses, with some trading bots detecting the rapid price trend and either piling in or pulling out, amplifying volatility.

AI-driven trading has also featured in the activity of quantitative hedge funds. Firms like Renaissance Technologies, Two Sigma, DE Shaw, and others have long used machine learning to devise strategies. A 2019 survey identified those four as pioneers in AI-driven investing. These firms process vast alternative datasets, from satellite imagery of retail parking lots to aggregated price patterns, looking for subtle predictive signals.

For example, AI can spot that a retail chain’s lawns are greener or read thousands of local news sites to update earnings estimates. In late 2022, Reuters reported Renaissance’s quant funds using models to target returns. Although strategies are secretive, experts agree that AI “provides a competitive advantage” in systematic trading.

AI and social media can also combine in troubling ways. Studies and news accounts warn of sentiment manipulation using bots. In a recent report, experts imagined hundreds of AI-generated social media profiles pushing a narrative about a stock. Real people reacting to the buzz drive the price up or down, while those who detect the narrative profit.

The danger is that neither the promoter nor some of the manipulators even realise they’re part of a larger AI-driven scheme, making enforcement hard. In practice, regulators have seen smaller-scale attempts in crypto and DeFi, where “malicious actors…deploy AI bots” on platforms like Telegram to hype assets.
These examples highlight how automated sentiment analysis and engagement can influence markets, sometimes legitimately, with bots surfacing true trends and at other times through coordinated pumping.

Speed, scale and smarter markets

The attraction of AI in finance is clear, as it does things humans cannot. Speed and automation are paramount. Machines can execute orders in microseconds and monitor markets around the clock, far faster than any trading floor. This rapid processing tightens bid-ask spreads and improves liquidity in normal times.

As the IMF notes, technology has “improved price discovery, deepened markets, and often dampened volatility” in normal periods. AI also excels at scalability and data processing. Financial markets generate enormous volumes of data on prices, news, social posts, filings, and satellite images, and AI can sift through it all.

Advanced neural networks and LLMs (Large Language Models) can turn unstructured text into structured signals. For instance, a generative model can instantly read a regulatory filing or earnings call transcript, flagging risks or opportunities. The IMF notes that generative AI lets investors “process very large amounts of unstructured, often text-based, data,” which can improve forecasts and price accuracy.

Another benefit is pattern recognition and precision. AI algorithms can spot complex statistical patterns that humans cannot see, such as nonlinear relationships or high-dimensional correlations.

In portfolio management, for example, deep-learning models and reinforcement learning (RL) can adapt trading rules over time. Quantitative analysts now use RL to optimise asset allocation dynamically, a method well-suited for constantly shifting markets.

These models “identify complex patterns in large datasets” by using millions of parameterised rules, going far beyond traditional formulae. In effect, AI can tailor strategies to ever-changing conditions, learning minute details of market microstructure.

This leads to efficiency and consistency, and routine tasks like compliance checks or customer service get automated via RegTech tools and chatbots, freeing humans for higher-level thinking. In trading, even a tiny improvement can be valuable. A recent AI pilot by HSBC reportedly found a quantum-enhanced model that improved trade-fill predictions by 34% over classical methods.

Finally, AI can open new markets and lower costs. According to the IMF, AI tools are reducing barriers to entry and making it feasible for smaller firms or even individuals to analyse less-liquid markets like emerging debt or certain commodities. By automating research, coding, and data gathering, generative AI might lower the expertise needed to trade exotic assets.

In retail finance, AI-powered robo-advisors have democratised wealth management. One report notes that about half of retail investors say they would use ChatGPT or similar AI to choose or rebalance investments.

This suggests AI is making advanced analysis available to “anyone,” not just Wall Street. Overall, proponents argue these gains, faster reactions to news, more thorough analysis, and automation, should make markets more efficient and investors more informed.

Herding, black boxes and volatility

AI in finance may sound like an interesting and exciting concept, but it is not risk-free. A key concern is model correlation or “monoculture.” When many firms use similar data and algorithms, their trades tend to move together. Regulators and economists warn that this can amplify swings.

For example, if numerous deep-learning models all see a similar signal, they might simultaneously sell stocks, creating a cascade. The Bank of England and the SEC have warned that advanced AI’s “hyper-dimensionality” and shared data sources could lead to just a few dominant models or data providers. In practical terms, a “monoculture” of strategies can increase market correlations and herding. In stressed markets, this may cause liquidity to evaporate suddenly.

A recent IMF analysis noted that many algorithmic funds include safety mechanisms that can all activate at once, causing feedback loops. The 2010 “Flash Crash” is a cautionary example of an automated sell order in one market leading to a chain reaction, briefly knocking 1,000 points off the Dow within minutes.

Though that crash predated today’s AI, it illustrates the danger of automated systems acting in unison. Experts now worry AI-driven trading could produce even faster and larger moves.

Closely related is model opacity and explainability. Modern AI models are often “black boxes” that even their designers cannot fully explain how a specific trading decision was reached. This poses problems for oversight. If an AI fund suddenly accumulates a large position in an obscure asset, regulators might not understand why.

The IMF notes that market participants insist on human oversight and explainable strategies, avoiding purely “black box” approaches. Likewise, a recent Sidley (law firm) report warns that deep-learning and reinforcement-learning systems can have “emergent behaviour” that current market rules aren’t built to catch.

For example, if an AI learnt to detect fraud or manipulate prices in some non-obvious way, standard surveillance systems might miss it. The opacity also raises ethical concerns. How do we verify that AI decisions are fair and unbiased? Finance is littered with historical biases, so an AI trained on past records might perpetuate discrimination. Wharton researchers point out that “bias in AI models is particularly pertinent” in finance, especially lending and insurance.

There are also privacy and manipulation issues. Bad actors can use AI to tailor scams or spread disinformation. SEC Chair Gary Gensler warns that AI-driven narrowcasting can facilitate fraud by zeroing in on individuals’ vulnerabilities. Indeed, regulators have already flagged concerns about AI-generated “deep fakes” of company announcements or rumours that could jolt markets.

Finally, there is the risk of systemic volatility. Many worry that AI might make crises worse by speeding up decision-making. In turbulence, when computers pile into or out of trades in milliseconds, prices can swing violently.

The Sidley report cites the IMF in noting that many AI strategies include circuit-breaker logic that all trigger together under unprecedented moves, risking a sudden freeze of liquidity. In other words, while AI may “damp down” routine volatility by making markets more efficient, it might also set the stage for faster, sharper shocks. Small errors or adversarial attacks on widely used models could propagate quickly across markets. There’s also a concentration risk, and just a few tech firms provide the most advanced AI services and cloud infrastructure, so outages or cyberattacks could disrupt financial systems more broadly.

Governance meets technology

Awareness of these issues is growing. Governments and regulators worldwide are moving to govern AI in finance. In the EU, for example, the new AI Act will classify many financial AI systems as “high-risk” and impose strict obligations.

Practices like AI-based credit scoring or risk pricing will have to meet transparency, data quality, and audit requirements. The stated goal is “consistency and equal treatment in the financial sector.”

Financial institutions are also starting to set their own AI governance. Many banks now require human sign-off on automated strategies. Investment funds maintain “model risk management” teams to test how strategies behave under stress. After the GameStop episode, social platforms began cracking down on stock-promo groups. And financial regulators update rules in light of faster trading speeds.

Still, experts say more will be needed. For example, regulators worry about a lack of transparency when nonbanks use cutting-edge AI outside full supervision. There are calls for international coordination, like the Financial Stability Board surveying AI preparedness in different countries.

Another trend on the horizon is quantum computing. While today’s AI uses classical computers, quantum machines promise even more power. If scalable quantum computers arrive, they could revolutionise optimisation and simulation problems in finance.

Banks are already experimenting. In 2025, HSBC announced a pilot with IBM showing that a quantum algorithm could predict bond trade outcomes 34% better than classical methods.

UBS, Citigroup, and others are researching quantum for portfolio optimisation and risk analysis, and analysts estimate the “quantum technology” market could reach $100 billion by 2030.

In plain terms, quantum computing could solve certain portfolio or pricing problems much faster than today’s fastest supercomputers. However, practical quantum advantage remains in early stages, and much of that promise is years away. Even so, finance leaders like HSBC’s quantum head call this a “new frontier” in computing for markets.

Tale of two traders

The AI wave affects big institutions and small investors differently. Large financial firms such as banks, hedge funds, and trading firms have the resources to develop sophisticated AI. They run vast data centres, hire machine-learning experts, and deploy cutting-edge models.

These institutional players have led the AI adoption for over a decade as they’ve used automated algorithms in HFT and complex derivatives trading. They also invest in AI for risk management and compliance. Because of their scale, they have an edge in computing speed and data access.

Retail investors have lagged but are catching up. The same chatbots and analysis tools that institutions use are now available to individuals in a lighter form. As one industry report noted, about half of retail investors say they would use AI tools to pick or adjust investments, and around 13% already do. User-friendly platforms now offer AI-driven advice and portfolio screening.

For example, retail-friendly robo-advisors automate investing for individuals with modest accounts. Even individual day traders are experimenting with off-the-shelf AI bots or sentiment-tracker apps. Indeed, the widespread curiosity about ChatGPT and AI has “democratised” access to analysis once reserved for big banks. One former UBS analyst remarked that using ChatGPT for stock research was akin to “replicating many workflows” of an expensive Bloomberg terminal.

Balancing innovation and stability

AI’s role in finance is growing fast. As the IMF puts it, generative AI is the “latest stop on a journey” where technology incrementally improves markets. Its benefits in faster processing, new insights from data, and lower costs have already transformed many aspects of trading and investment.

But the journey is not without bumps. Our analysis shows that there are real risks that correlate with AI models, as they could unintentionally synchronise market behaviour, create opaque algorithms, trigger flash crashes, and mislead investors.

Addressing these issues will require vigilance and innovation on their own part. Regulators are awakening to the challenge, calling for AI governance frameworks and updating rules for our faster, more complex markets.

Financial firms are instituting controls on things like explainability requirements and kill switches for trading bots. Meanwhile, new technologies on the horizon, like quantum computing, promise even more powerful tools.

In the end, the AI transformation in finance mirrors other revolutions by creating opportunities and pitfalls. The central question will be how these systems are deployed. Used wisely, they can make markets more efficient and accessible to more people. Used recklessly, they could amplify our worst crashes or widen inequalities.

For investors and policymakers alike, the task is to harness AI’s ingenuity while keeping our collective financial system resilient. Industry leaders must ensure AI markets remain “transparent, fair, and inclusive,” even as the algorithms get ever smarter.

The post AI drives change in global markets appeared first on International Finance.

“Despite the current yield level, which ⁠is high, ‌the auction outcome was not strong,” said Katsutoshi Inadome, a senior strategist at Sumitomo Mitsui Trust Asset Management, while interacting with Reuters.

“That is because the market ⁠is concerned that the Bank of Japan (BOJ) is behind the curve in dealing with the risk of inflation, and it will have to raise the rate higher,” he added.

The 10-year bond yields climbed to ⁠a near three-decade high in the previous session, leading to the January 6 auction, as markets braced for further interest rate hikes by the BOJ. The central bank raised ‍its policy rate to 0.75% from 0.5% in December 2025, but the yen has struggled to regain ground as markets expect the pace of the BOJ’s rate hikes to remain slow.

A weaker yen, while lifting import costs and fuelling inflation, also reinforces analyst expectations of further interest rate hikes.

“Markets now expect the BOJ’s terminal rate to rise to about 1.7%, based on forward one-year overnight index swaps (OIS) two years ahead, which are pricing in roughly 1.6956%,” Inadome said.

The OIS, a rate for swapping the overnight call rate and a fixed interest rate, provides an effective ⁠way to monitor market perceptions about the BOJ’s monetary ‌policy.

“Yields on longer-dated bonds also rose, with the 20-year JGB yield edging up 1.5 bps to 3.06%. The 30-year JGB yield rose 2 bps ‌to 3.475%. The ⁠two-year JGB yield inched down 0.5 bp to 1.185%. The five-year yield was flat ⁠at 1.595%,” Reuters concluded.

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Divestments such as Alpha Dhabi’s exit from Modon, which generated AED 5.3 billion, will drive the push towards accelerating the conglomerate’s global expansion and capital deployment strategy.

“The company has a two-fold approach. One supports portfolio companies in executing their growth strategies through governance. The other, deploys its own money and recycles capital through IPOs and reinvestment into high-growth sectors,” Zawya reported.

The conglomerate, which operates in 45 countries, is now targeting acquisitions that offer scale, synergies, and robust returns rather than geographic presence alone.

“We’re not focused on planting flags in new markets for the sake of it. […] instead, we seek acquisitions with the right risk profile, returns, and synergies. Our outlook is global—Asia, Europe, East and West—wherever scale and strategic fit exist. We would encourage them [portfolio companies] to take on more debt, but within benchmarks that are right for their particular industry and aligned with their business plans and cash flows,” Nicholson said, while stating his venture’s new approach: favouring conservative leverage in funding, while keeping track of the improving monetary conditions as interest rates peak and trend downward.

The group is also exploring Abu Dhabi’s debt markets for diversified financing, including potential debt issuance. While stating that IPO timelines remain market-dependent, Nicholson said that any of the conglomerate’s private portfolio companies could go public when “ideal conditions” arrive. He also dismissed concerns that the lacklustre post-listing performance of recent UAE IPOs could dampen market sentiment, emphasising that fundamentals remain unchanged, while capital markets continue to be strong.

“From our meetings with banks, I’ve seen the IPO pipeline—it’s larger than ever in terms of companies considering going public. It is nice to see there’s such a strong appetite for companies to move from private to public. That gives us confidence that, come the right time for the right transaction, it will be successful,” the senior official remarked.

Beyond IPOs, Alpha Dhabi may monetise the sizable stakes that it has in companies through accelerated bookbuilds (ABBs) or strategic sales. On that, Nicholson added, “The advantage we have is flexibility. There’s no pressure to [launch an] IPO within a fixed timeline, and we can take a long-term view.”

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In practice, this means clear rules and strong oversight to ensure companies are run ethically and in the best interests of their stakeholders. In recent years, the United Arab Emirates (UAE) has made corporate governance a top priority by updating laws, aligning with international standards, and reshaping how boards of directors operate.

International Finance explores the principles of corporate governance, how boards’ roles have evolved from ceremonial to strategic, and what makes boards effective today.

It also highlights the UAE’s progress, focusing on a real example from the Commercial Bank of Dubai in raising governance standards.

What is corporate governance?

At its simplest, corporate governance is about how a company is controlled and directed for the benefit of its owners (shareholders) and other stakeholders. It sets out the relationships among shareholders, boards of directors, and management, defining their roles and responsibilities. A well-governed company has systems to balance the interests of everyone involved, from investors and managers to employees, customers, and the community.

With the right structures in place, good corporate governance facilitates an atmosphere of trust and openness inside and outside the company. For example, companies that adhere to governance best practices routinely publish honest and thorough reports on their financial health and operations, which builds transparency and credibility.

Such transparency makes it easier for investors to trust the company, knowing they will receive timely, accurate information. As the OECD (a global policy standard-setter) notes, governance promotes “trust, transparency, and accountability, which promotes long-term patient capital”—in other words, it attracts investors who are willing to commit to the long term.

Strong governance also enhances accountability: clear rules mean that executives and directors can be held responsible for their decisions and performance. When companies are governed well, shareholders have ways to hold management to account, and management, in turn, is accountable to the board. All of this reduces the risk of mismanagement or corruption and leads to more sustainable success.

Crucially, governance is linked to long-term business sustainability. Companies that operate transparently and accountably tend to make decisions that favour long-term growth over short-term gambles. By setting checks and balances like independent board oversight and strong audit controls, corporate governance helps ensure a company can weather challenges and continue thriving for years to come.

In the UAE, regulators explicitly state that governance aims to achieve transparency, protect shareholders, combat improper conduct, and ensure companies meet their goals and long-term strategy.

As one corporate advisory firm summarised, strong governance enhances investor confidence by demonstrating transparency and attracting investment. It also leads to better risk management and decision-making, ultimately improving a company’s reputation and stability.

The evolution of board roles

As recently as the 1990s, serving on a board was often seen as an “honorary” position, a form of recognition, and many closely held businesses didn’t bother having a formal board at all. Boards would convene infrequently to rubber-stamp decisions or provide polite oversight, but seldom to actively shape strategy. They were, as one account puts it, “largely ceremonial” in those days.

A series of corporate scandals and crises in the late 20th and early 21st centuries changed this. Major failures, from the Cadbury corporate governance scandals in the United Kingdom in the early 1990s to the infamous Enron collapse in 2001 and the 2008 global financial crisis, exposed that inactive or complacent boards were often a weak link in corporate oversight.

Each crisis prompted reforms and sharpened expectations for boards. Laws like the Sarbanes-Oxley Act (2002) and codes of best practice worldwide put the onus on boards to truly monitor management, ensure financial integrity, and manage risk. As a result, the public and regulators began to expect directors to be watchdogs and strategic guides rather than figureheads.

Fast forward to today, and the role of boards has expanded dramatically. A modern board is “asked to be all things to all people.” Not only must it provide direction and approve major decisions, but it must also guarantee compliance with laws and regulations, diligently monitor risks, and even act as a champion of corporate social responsibility.

In other words, boards have shifted from being symbols of stability to active stewards of the company’s future. One analysis describes the board of directors now as the “fulcrum for change”—sandwiched between shareholders’ expectations and society’s demands. They are expected to ensure the company not only profits but also behaves responsibly towards employees, the environment, and the community.

This evolution is also evident in the UAE’s corporate landscape. Traditionally, some boards in the region were dominated by founding families or prominent figures, and their oversight could be considered light-touch. But the pressures of globalisation and a maturing economy have driven change.

As Wajahat Gul Memon, a corporate governance lead at the Commercial Bank of Dubai, explained, “Boards are no longer merely fulfilling regulatory requirements. They are driving long-term value creation and ensuring that the organisation remains resilient in the face of changing market conditions.”

UAE’s corporate governance advancements

In the past decade, and especially in recent years, the UAE has made a concerted push to elevate corporate governance standards across its business sector. This effort has involved enacting new regulations, updating existing codes, and ensuring local practices keep pace with international norms. These changes are not happening in isolation, as they are part of the UAE’s broader strategy to promote a world-class business environment that attracts investment and sustains growth.

One cornerstone of the UAE’s governance reform was the Securities and Commodities Authority (SCA)’s Corporate Governance Guide for public joint-stock companies, which was approved in 2020 (via Decision No. 3/Chairman of 2020) and later amended in 2021 and 2024. The SCA, which regulates stock markets in the UAE, introduced these rules to strengthen oversight of listed companies.

Some of the key reforms include requiring that at least one-third of board members be independent directors, with clear criteria to define independence and avoid conflicts of interest. Notably, a special exemption that once allowed certain government-affiliated representatives to be deemed “independent” was eliminated to ensure true independence on boards.

Then there is mandating board diversity by insisting that each board have at least one female director. This moved diversity from a nice-to-have to a legal must-have, catalysing the sharp rise in women’s participation in boardrooms.

The reform also emphasises director competence and engagement, for instance by stipulating that board members must have relevant experience/qualifications and limiting the number of directorships one person can hold to ensure they have time to fulfil their duties.

“Audit Committees,” “Nomination & Remuneration Committees,” and “Risk Management Committees” are compulsory for listed firms, each with defined roles to enhance financial oversight, fair appointments, and risk governance.

Additionally, companies must implement robust internal control and risk management systems, with boards required to regularly assess their effectiveness. Recent amendments even specify that risk frameworks should align with globally recognised best practices like the COSO framework for internal controls.

Companies now also have to provide more detailed public reports—not just financial statements but also governance reports and even sustainability (ESG) reports. For example, an Integrated Report combining financial, governance, and other disclosures must be published within three months of the year-end. These measures ensure shareholders and the market get a fuller picture of each company’s performance and governance practices.

Protecting shareholder rights, especially minority investors, is also a big concern. The reforms bolstered mechanisms for calling shareholder meetings, voting on major transactions, and disallowing last-minute agenda additions that could disadvantage minority shareholders. The overall aim is to make sure all shareholders are treated fairly and have a voice.

They are also introducing board evaluations and improved governance processes. UAE-listed companies must perform annual evaluations of their board’s performance, with an independent external evaluation at least once every three years. There are also new guidelines for board secretaries (who support governance administration) to ensure they are qualified and operate with a degree of protection from undue interference. All these steps underscore a theme that the UAE is aligning its corporate governance framework with international best practices.

In fact, the SCA explicitly stated that these changes are part of “ongoing efforts to align the UAE’s corporate governance standards with international best practices, thereby facilitating a more robust and transparent business environment.”

The 2024 amendments to the governance code, in particular, were described as a “critical shift towards strengthening governance in line with global standards,” covering independence criteria, related-party definitions, and board composition. Likewise, officials from the SCA have noted that adopting global best practices in governance is key to the UAE’s vision for an inclusive, sustainable economy.

The impact on the investment climate has been significant and positive. Stronger corporate governance has made UAE markets more attractive to local and foreign investors. When investors see rules that ensure transparency, accountability, and minority protection, they are more willing to invest their capital, knowing their interests will be safeguarded.

A country report on the UAE’s financial markets observed that regulatory reforms, including improved corporate governance and disclosure rules, are part of the “broader efforts to enhance the attractiveness of UAE capital markets for investors and businesses.”

In practical terms, this means higher demand for UAE stock offerings and greater participation by institutional investors who typically insist on good governance. Indeed, the UAE has recently witnessed a boom in public listings (IPOs) and an inflow of global investment, supported by confidence in the market’s regulatory integrity.

Companies with good governance are generally less risky and more stable, which lowers the cost of capital. As one corporate advisor explained, compliance with the new code isn’t just about avoiding penalties as it “goes beyond just meeting compliance requirements” by yielding benefits like higher investor trust, stronger risk management, better decision-making, and enhanced brand value. All of these factors encourage a healthier investment climate. We can see this manifest in the UAE with rising investor interest and trust in UAE companies.

The post Why corporate governance matters to investors appeared first on International Finance.

“We have moderated our risk positioning since April 2nd – I think that’s a sensible thing for us to do. We are absorbing a lot of risk from our clients. We want to continue to do that, but we also, where we can, we (pare) our risk and stay a little bit closer to home,” Goldman Sachs President John Waldron said in a podcast released by the investment bank.

According to Goldman Sachs, he is maintaining a larger liquidity cushion in anticipation of ongoing uncertainty in the upcoming months. Since Donald Trump’s so-called “Liberation Day,” when he declared his intention to raise tariffs on trading partners, financial markets have been tumultuous.

The tariff move was “very, very disruptive,” according to John Waldron, who is generally regarded as Goldman Sachs CEO David Solomon’s likely successor.

He stated that some businesses are now beginning to base their business decisions on the presumption that tariffs will be increased to between 10% and 15%.

“We’re now moving into an adjustment phase, and you’ll see, I think, some more decision-making on capital spend, M&A transactions, capital return, stock buybacks,” John Waldron said.

According to him, the American economy is still robust due to a strong labour market and consumer spending.

“All those factors in the US to me lead to a likely scenario where we don’t have a recession,” he said.

In the meantime, John Waldron cautioned that investors were growing anxious about the US budget deficit, which was unsustainable.

“The bond market is starting to be heard, and I hope that gets some attention in the halls of Congress,” he said.

In May 2025, Moody’s, the final major ratings agency to downgrade the United States, lowered its pristine sovereign credit rating by one notch, citing worries about the country’s mounting debt load of USD 36 trillion.

“The path of interest rates, especially in the long term, is the biggest question for markets,” John Waldron concluded.

The post Goldman Sachs pares risk after Trump tariff move, braces for more uncertainty appeared first on International Finance.

Where it all began

When Mulyani Indrawati was first appointed finance minister in 2005, Indonesia’s economy was in tatters. The country was still reeling from the late-1990s Asian financial crisis and struggling to recover from a devastating tsunami in Aceh and several earthquakes that required massive reconstruction funding. The cost to rebuild Aceh alone was estimated at around $4.5 billion, much of it needing foreign aid.

In Jakarta, the Finance Ministry she inherited was bloated and inefficient, while state institutions were rife with corruption. The nation’s largest bank, Bank Mandiri, had been mired in corruption scandals, and the banking sector at large was shaky. Poverty and unemployment were stubbornly high. Indrawati’s desk was piled high with urgent reforms from day one.

Facing this crisis, Indrawati moved swiftly. One of her first acts was to clean house. She fired dozens of corrupt tax and customs officers and disciplined thousands more, signalling a zero-tolerance stance on graft. She overhauled incentive structures in her ministry by paying honest officials better to remove the temptation of bribes. Backed by reformist President Susilo Bambang Yudhoyono, she slashed wasteful spending and tightened Indonesia’s budget. These efforts restored investor confidence, as foreign direct investment nearly doubled in her first year, from $4.6 billion in 2004 to $8.9 billion in 2005.

In 2008, Indonesia was affected by the global financial crisis, resulting in capital flight and a liquidity crunch. The crisis prompted the emergency bailout of Bank Century, a medium-sized lender, to prevent a widespread bank run. The government injected roughly Rp6.7 trillion (around $700 million) to rescue Bank Century, arguing it was necessary to protect the broader banking system. The bailout soon exploded into one of Indonesia’s longest-running political scandals. Critics alleged the rescue was mishandled and that some of the Rp6.7 trillion might have ended up in the wrong hands.

A special parliamentary enquiry claimed there were suspicious transactions and potential fraud associated with the bailout. Though Indrawati defended the decision as necessary to avert systemic collapse, the ruckus that ensued in the media and legislature put her under intense pressure.

Economist who means business

By 2010, Mulyani Indrawati had made a big impression on Indonesia’s economic trajectory. During her first tenure, growth rebounded (hitting 6.6% in 2007, the highest since the 1997 crisis), and public debt fell dramatically. Indonesia’s debt-to-GDP ratio, which had exceeded 90% in the aftermath of the Asian crisis, was brought down to around 30% by 2009, immensely improving the country’s fiscal stability. These achievements earned her international accolades.

Euromoney magazine named her “Finance Minister of the Year” in 2006, and she was lauded as Asia’s Finance Minister of the Year by Emerging Markets in 2007.

After six years at the World Bank, Indrawati returned to Jakarta in 2016 at the request of President Joko Widodo. Nearly 20 years after her initial appointment, she has now been back in the finance chief’s seat for almost a decade. The economic proof is there for all to see.

Under her stewardship, Indonesia’s economy was thoroughly overhauled and expanded. Annual growth has generally been robust (typically in the 5–6% range in the late 2010s), and prudent fiscal management has slashed government debt levels. Borrowing costs have fallen, and credit ratings have improved. GDP grew from about $286 billion in 2005 to nearly $1.5 trillion by 2025.

This rapid rise has vaulted Indonesia into the ranks of the world’s 20 largest economies. The once-sprawling Finance Ministry has been slimmed down and modernised, especially in tax collection and customs, which were hotbeds of corruption before. Indrawati’s reforms in those areas, including digitising systems and cracking down on tax evaders, helped boost the number of registered taxpayers from 4.35 million in 2005 to almost 16 million by 2010, and even more in the years since.

Insatiable desire for infrastructure

For all of Indonesia’s gains, Mulyani Indrawati has also faced an uphill battle against deeply entrenched challenges. Upon returning to office in 2016, she found that some reforms had stalled in her absence, and new issues had emerged. In 2017, an OECD research paper bluntly concluded that Indonesia still had significant room for improvement in public governance.

“The quality of public governance, as measured by the World Bank estimate of government effectiveness, puts Indonesia well behind countries like the Philippines, Thailand, Malaysia, Vietnam, and Singapore,” the OECD noted.

In other words, Indonesia’s bureaucratic effectiveness lagged many of its regional peers, affecting everything from business licensing to public service delivery. Indrawati has worked to streamline regulations and improve coordination between central and local governments, but changing a large bureaucracy’s culture is a slow process.

A particular sore point has been Indonesia’s inadequate infrastructure, which for years has been a bottleneck to growth. A 2016 World Economic Forum report on competitiveness highlighted that Indonesia’s overall competitiveness (ranked 41st out of 140 economies) was dragged down by the poor quality of infrastructure, which ranked only 60th. The country suffers from chronic shortages of power, congested ports and airports, and overloaded roads and railways.

“Indonesia’s competitiveness is dragged down by the poor quality of its infrastructure (60th),” the WEF report warned, citing factors like frequent electricity outages for industry and inadequate transport networks. For a sprawling nation of over 17,000 islands, building connectivity is a colossal and expensive undertaking.

Mulyani Indrawati has had to juggle demands for new infrastructure spending against the need to maintain fiscal discipline. Under her guidance, infrastructure outlays did increase, especially during President Widodo’s term, which prioritised new highways, airports, and a subway for Jakarta, but progress sometimes felt slow given the scale of needs.

Nonetheless, Indrawati is undeterred. She sees infrastructure and human capital investment as the keys to unlocking Indonesia’s next level of development. In the late 2010s, she oversaw innovative financing schemes, such as infrastructure bonds and public-private partnership frameworks, to stretch public funds further in building roads, power plants, and ports. By 2020, such efforts were paying off, with multiple new toll roads and transit projects completed.

She also championed major increases in funding for education and healthcare. Indeed, about 20% of Indonesia’s national budget is now devoted to education, a priority Indrawati has consistently supported. This reflects her belief that long-term growth depends on a skilled, healthy population.

A prudent finance minister

Even as she pushes forward on economic reforms, Mulyani Indrawati now faces perhaps her most delicate political test yet. In late 2024, Indonesia elected a new president. Prabowo Subianto, a retired army general, marked the third administration Indrawati has served under (after Yudhoyono and Widodo). Prabowo campaigned on ambitious populist promises to accelerate growth and tackle inequality. Once in office in 2025, he wasted no time rolling out bold (and expensive) programmes, with expectations of rapid results.

Among his headline initiatives is an “extreme poverty eradication” free meals programme targeting schoolchildren and pregnant women across the country. The plan aims to provide free nutritious meals to more than 80 million young and expectant Indonesians. Indeed, in January 2025, the government quietly launched the first phase, serving meals to some 570,000 students and pregnant women on the first day alone.

Prabowo Subianto envisions scaling up to reach 82.9 million people by 2029 under this programme. While few dispute the merits of fighting child malnutrition, the cost of this free food initiative is enormous. Initial estimates put the price tag at around $28 billion over five years. It’s a figure that alarms many economists, given Indonesia’s commitment to fiscal discipline. In its first year, 2025, the programme is budgeted at 71 trillion rupiah to feed 15 million people. Such sums risk blowing up the deficit unless offset by new revenues or cuts elsewhere.

Prabowo Subianto’s vision isn’t limited to free meals. He has also touted grand plans for Indonesia to achieve food self-sufficiency by dramatically expanding domestic agriculture. His administration talks of creating vast new rice paddies and even large sugarcane plantations to reduce reliance on imports of staples like rice and sugar.

Unsurprisingly, the markets have reacted nervously to these big-ticket promises. Investors worry that Prabowo’s agenda, which includes free meals for tens of millions, large-scale farming schemes, and a push for 8% annual GDP growth, could lead to bloated budgets or heavy borrowing. In mid-2024, as his campaign promises became known, Indonesian bond prices wobbled, and the rupiah currency weakened.

Upon Prabowo Subianto’s election, credit rating agencies signalled concerns that debt and deficits might rise. When he reiterated plans for free school meals (in a country of 270+ million people) and other subsidies, the rupiah fell as much as 0.4% in a single day, prompting Indonesia’s central bank to intervene to stabilise the currency. Financial markets were essentially firing a warning shot. They view Indrawati as the guardian of fiscal prudence, and any sign that her influence might be sidelined or that spending might spiral is met with anxiety.

This has set up a potential showdown between Prabowo’s expansive social spending agenda and Indrawati’s cautious fiscal approach. Behind closed doors, the technocratic finance minister has reportedly pushed back on some of the more expensive proposals, urging phasing or scaling them down to keep the budget sustainable. Rumours swirled in early 2025 of tensions between the president and his finance minister.

Political gossip even suggested Indrawati might resign rather than sign off on unsound fiscal policies. Prabowo’s own nephew, Thomas Djiwandono, whom Prabowo had installed as a deputy finance minister, could replace her. Such talk hit the news in March 2025, when The Straits Times reported on “whispers” that Indrawati might be replaced.

Whether Indrawati and Prabowo will continue to coexist amicably is a question that markets and Indonesians are watching closely. But if it comes to a true showdown, many believe that one of the region’s most capable finance ministers holds considerable cards. Sri Mulyani Indrawati carries the trust of investors, the respect of Indonesia’s civil society, and the hard-won experience of steering through many storms.

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The economic impact of ongoing conflicts in this volatile region cannot be understated, and as recent events unfold, it becomes crucial to analyse what it means for the interconnected global economy. The conflicts involving Israel, Palestine, Lebanon, and Iran have resulted in significant loss of life and economic damage.

Moreover, the escalating tensions have raised concerns about the potential onset of a broader global conflict, with some experts warning that the current situation could spark World War III if regional actors and global superpowers are drawn into confrontation.

Clash of geopolitical interests

With Iran’s ongoing proxy warfare, Israel’s expanding occupation, and the involvement of Washington and Moscow in regional dynamics, the conditions are ripe for a scenario where a local conflict spirals into a full-scale global war. Such an outcome would have catastrophic economic consequences, plunging the world into recession and disrupting supply chains, global energy markets, and international trade.

The Israel-Palestine conflict has led to thousands of casualties. Lebanon, meanwhile, continues to struggle with economic collapse, worsened by clashes involving Hezbollah and Israel, which have caused hundreds of casualties and significant infrastructure damage.

The longstanding proxy conflict between Iran and Israel, on the other hand, has escalated into direct military confrontations, significantly altering the Middle Eastern geopolitical landscape. The international community is closely monitoring the situation, apprehensive about the possibility of a wider regional war.

This direct engagement underscores the fragility of Middle Eastern stability and the potential for significant geopolitical shifts resulting from the Iran-Israel confrontation.

These conflicts come at a time when fears of a global economic recession are heightened, exacerbated by the ongoing Russian-Ukrainian conflict, with Russia being one of the world’s biggest oil producers. The combined pressure from disrupted energy supplies and heightened geopolitical risk creates a precarious situation for the global economy.

World’s reliance on Middle East

The Middle East holds approximately 55.5% of the world’s proven crude oil reserves, with countries like Saudi Arabia, Iran, Iraq, and the United Arab Emirates (UAE) playing key roles in oil production. Whenever tensions escalate in this region, oil prices immediately react as uncertainty around oil supply chains heightens.

The most recent wave of conflict has already caused a sharp uptick in global oil prices The mere possibility of disrupted supply, or even the fear of a blockade in strategic choke points such as the Strait of Hormuz, where nearly 21% of global oil passes, sends markets into a frenzy react not only to physical disruptions but also to the perception of future threats, leading to price volatility, leading to inflation and increased costs across industries.

Industries ranging from aviation to plastics and logistics are all affected by rising energy costs. This, in turn, can slow down economic growth, as higher inflation usually prompts central banks to raise interest rates, making borrowing more expensive for businesses and consumers alike.

The Middle East’s geographic position is critical to global trade. The Suez Canal, for instance, is one of the world’s most important waterways, linking Europe to Asia. Any conflict that poses a risk to the security of this passage immediately impacts global shipping, causing delays and raising insurance costs for vessels navigating through the region.

In times of heightened tension, the risks for commercial vessels increase substantially, often resulting in surging insurance premiums known as “war risk” insurance. These additional costs get passed on to consumers, driving up the cost of goods globally. The longer these tensions persist, the greater the likelihood of shipping companies rerouting or slowing down operations, both of which contribute to supply chain disruptions and can cause shortages of goods, from consumer electronics to essential commodities.

Conflicts often lead to the imposition of economic sanctions, not just by countries directly involved but also by global powers like the United States, the European Union, or the United Nations. These sanctions can restrict trade, impact foreign investment, and limit access to international financial systems for those countries involved.

For instance, sanctions on Iran’s oil exports have historically caused significant shifts in the global oil market, reducing supply and causing price increases. Sanctions can also cause disruptions in the supply of other goods, such as petrochemicals, fertilisers, and metals, which are key exports from the region. As supply chains are disrupted, global industries dependent on these inputs, like agriculture, pharmaceuticals, and automotive manufacturing, feel the pressure.

The secondary impact of sanctions also reverberates across countries that have significant trade relationships with the sanctioned nations. For example, European firms, which have substantial investments in Middle Eastern energy projects, often find themselves caught in the middle, unable to engage in their ventures without risking penalties.

Investor sentiment, market volatility and inflation

When war or conflict erupts, global stock markets often see heightened volatility, as investors flock toward safer assets like gold or American Treasury bonds. In October 2023, for instance, the price of gold rose by nearly 7% following escalations in the Israel-Palestine conflict. This movement of capital out of riskier markets can lead to temporary liquidity shortages and increased borrowing costs for businesses.

Emerging market economies, which are typically more vulnerable to shifts in investor sentiment, are particularly impacted. In 2023, emerging markets saw a collective capital outflow of $15 billion during heightened tensions in the Middle East, leading to currency depreciations and potential economic instability in these regions.

Investors tend to pull funds out of these markets and place them in “safe havens,” such as US Treasury bonds. The global interconnectedness of today’s financial systems means that these effects aren’t isolated, economic slowdowns in emerging markets can have a cascading impact on global trade and investment flows.

Additionally, countries within the Middle East that are engaged in or adjacent to conflict zones often experience capital flight, where both local and foreign investors pull out their money due to fears of instability. For instance, Lebanon experienced capital flight amounting to nearly $5 billion in 2022 amidst ongoing instability. This diminishes growth prospects in these nations and further deters future foreign direct investment (FDI), leading to a vicious cycle of economic stagnation.

The global inflationary impact of a Middle East conflict extends beyond energy prices. The region is also a significant exporter of petrochemicals, fertilisers, and key agricultural products, accounting for approximately 25% of global petrochemical exports and 20% of global fertiliser supply. Disruption in the supply of these commodities can lead to rising input costs for agriculture around the world, driving food prices up.

For many developing economies, where a significant portion of household income (often more than 50%) goes towards food, this can exacerbate poverty levels and create social unrest. Rising fuel prices, which have increased by over 20% in the last year alone, also increase transportation costs, which further drives food inflation, creating a squeeze on both producers and consumers. The domino effect of higher food prices often forces central banks to adopt tighter monetary policies, potentially stalling economic growth and worsening income inequality.

The wider impact

The Israel-Palestine conflict has persisted for decades, and each resurgence brings with it a host of economic consequences. Israel is a significant player in technology and defence exports, and its robust economy often stands in stark contrast to the Palestinian territories, which face chronic underdevelopment and resource constraints due to political and military tensions. When tensions escalate into open conflict, the implications for the global economy can be severe.

One major impact is on investor confidence. Israel, a technology hub often compared to Silicon Valley, attracts billions of dollars in foreign investment annually. In 2022 alone, Israel attracted over $22 billion in foreign direct investment. The Tel Aviv Stock Exchange can see significant fluctuations when conflicts flare up, leading to an outflow of capital and heightened risk premiums. For instance, during the May 2021 conflict, the Tel Aviv 35 Index fell by nearly 2.5%, demonstrating investor concerns. Additionally, Israel’s advanced military capabilities are both a source of tension and economic burden, as resources are diverted to defence spending, which amounted to over 5.6% of its GDP in 2023.

The humanitarian situation in Gaza and the West Bank also directly affects international aid flows. As conflict intensifies, countries and international organisations funnel significant resources into humanitarian aid, which could otherwise be used for development projects elsewhere. This dynamic redirects financial resources, creating inefficiencies in global economic development initiatives and placing additional burdens on donor countries.

Lebanon’s economic collapse is a critical facet of the broader Middle Eastern crisis, exacerbated by its involvement in regional conflicts, including the Israel-Hezbollah tensions. Lebanon’s financial system has been in a state of free fall for several years, with its currency losing over 90% of its value, unemployment surging, and banking restrictions preventing ordinary citizens from accessing their savings.

Lebanon’s instability has a ripple effect across the region, particularly affecting Syria and the broader Levant area. Hezbollah, a powerful political and military force in Lebanon, receives backing from Iran, and its conflicts with Israel lead to frequent military engagements that disrupt stability not only locally but also in Israel’s northern regions.

In recent years, there have been over 300 recorded skirmishes between Hezbollah and Israeli forces, leading to dozens of casualties and significant damage to infrastructure in both Lebanon and northern Israel. These conflicts have impacted regional stability, contributing to widespread economic losses and infrastructure damage, including the destruction of residential buildings and energy facilities. Such disruptions often impact the wider energy markets, as the risk of conflict spilling over into neighbouring oil-rich countries raises the stakes for global energy supplies.

The inability of Lebanon to provide basic services has resulted in the mass emigration of its population, many seeking refuge in European countries. The refugee crisis puts economic pressure on neighbouring countries like Jordan and Turkey, which have accepted over 1.4 million and 3.6 million refugees respectively, as well as European nations like Germany, which has taken in around 1.1 million refugees. These countries have to redirect financial resources to deal with the social and economic integration of refugees, placing significant strain on public services and infrastructure.

Iran is a significant player in the Middle East, both politically and economically. Its influence stretches across Iraq, Syria, Lebanon, and Yemen, making it a key stakeholder in regional stability. The long-standing sanctions imposed by the United States and its allies have significantly hindered Iran’s economy, limiting its ability to export oil and access international financial markets. Iran’s GDP has contracted by over 6% in certain years due to sanctions, and oil exports have fallen from 2.5 million barrels per day in 2017 to less than 500,000 barrels per day in recent years, resulting in an estimated financial loss of over $150 billion.

Despite sanctions, Iran continues to be a key regional player, and any conflict involving Iran has immediate consequences for global oil prices. The Strait of Hormuz, through which approximately one-fifth of the world’s oil supply passes, is a strategic chokepoint that Iran has threatened to block in times of heightened tension. In 2019, for example, Iran was accused of attacking oil tankers in the Strait, which led to a temporary spike in oil prices by nearly 4%.

Additionally, in July 2021, Iran seized a tanker in the Strait, which again raised concerns over oil supply security and caused market jitters. Any disruption here could lead to an enormous spike in oil prices, affecting economies worldwide. Countries that heavily rely on oil imports, such as China, India, and European nations, would feel immediate economic stress, potentially leading to increased inflation and stunted economic growth.

Iran’s influence over proxy groups in Lebanon, Syria, Iraq, and Yemen adds a layer of unpredictability to the regional dynamics. The country’s support for Hezbollah and its presence in Syria has put it in confrontation with Israel. Such a conflict would not only devastate the region economically but would also disrupt global financial markets due to the uncertainty it would introduce.

A multi-front conflict could lead to a significant economic downturn, impacting various sectors worldwide. For instance, the energy sector would face extreme volatility, with oil prices likely to spike due to potential supply disruptions from Iran and its allies targeting key infrastructure.

The risk to global shipping routes, particularly through the Suez Canal and the Strait of Hormuz, would severely disrupt global trade. Insurance costs for shipping through these areas would skyrocket, raising the prices of goods worldwide. The resulting supply chain disruptions could lead to shortages in essential goods and exacerbate the inflationary pressures already being felt in many parts of the world.

Additionally, increased defence spending by regional powers and their allies would divert public funds away from crucial areas such as healthcare, education, and infrastructure development. For instance, the United States increased its defence budget by over $45 billion in 2023, largely attributed to rising commitments in the Middle East, while European allies have collectively raised their defence spending by approximately 10% over the last two years. This redirection of funds has led to reductions in public spending in areas like healthcare and education, exacerbating fiscal deficits and putting pressure on domestic economies.

Humanitarian costs would also rise, with millions likely displaced due to the conflict. This would necessitate large-scale international aid and assistance, putting additional strain on global humanitarian organisations and donor nations. The impact of these displacements would be felt globally, not only in terms of aid but also through increased refugee migration, which could exacerbate social and political tensions in host countries.

As the world watches the Middle East, the decisions made by global leaders, multinational corporations, and financial institutions will play a crucial role in determining whether we can navigate the turbulent waters of economic uncertainty or become swamped by the waves of conflict-induced challenges. The key takeaway is that stability in the Middle East is not just a regional concern, it is a critical factor for the health and growth of the global economy, and world leaders must work collectively to prevent escalation and promote peace.

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Alef Education, which raised USD 515 million on the Abu Dhabi Securities Exchange (ADX), and Spinneys, which raised USD 375 million on the Dubai Financial Market (DFM), were two of the biggest initial public offerings (IPOs) in the United Arab Emirates during the second quarter, according to PwC Middle East’s most recent IPO+ Watch.

Saudi Arabia was the leader in the Gulf region in terms of IPO activity reaching USD 1.6 billion, or 61% of all IPO activity in the region in Q2 2024. This quarter also saw the first initial public offering (IPO) on the Boursa Kuwait in two years, with USD 147 million raised by Beyout Investment Group Holding Company.

Notable IPOs on the Saudi Arabia stock market during the quarter included the IPO of Dr. Soliman Abdel Kader Fakeeh Hospital Company, which raised USD 763 million on the Tadawul stock exchange.

According to the report, this quarter’s IPO activity was observed in a number of different sectors, including technology, media, and telecommunication (USD 515 million), consumer markets (USD 530 million), financial services (USD 256 million), energy, utilities, and resources (USD 148 million), industrials, manufacturing, and automobile (USD 407 million), and health industries (USD 774 million).

A strong demand for financial products that comply with Sharia law was evident from the report, which highlighted the significant number of Sukuk issuances that occurred during the quarter, raising over USD 10 billion as opposed to USD 2.6 billion in the same period last year.

Companies in the fields like technology, healthcare, and real estate sectors are especially showing interest in exploring IPO opportunities, as the Gulf nation’s regulatory framework has also evolved to support this trend, providing a supportive environment for companies to enter into an IPO and list their shares.

“The technology sector has seen a surge in IPO activity, driven by the increasing demand for digital solutions and the UAE’s ambition to become a global tech hub. Healthcare companies are also looking to go public to raise funds for expanding their services and investing in advanced medical technologies. Meanwhile, the real estate sector continues to attract investors due to the UAE’s growing population and the demand for residential and commercial properties,” stated Simon Gordon, the managing director of Sovereign PPG Corporate Services, while interacting with the Middle East Economy.

“In the past decade, the Dubai Financial Market (DFM) and the Abu Dhabi Securities Exchange (ADX) have witnessed significant milestones, with an increasing number of listings and higher trading volumes. Thanks to regulatory changes that allow greater foreign ownership and participation, the markets have also become more accessible to international investors,” he stated further.

“Currently, the UAE stock markets are experiencing a bullish phase, driven by strong corporate earnings, high oil prices, and increased government spending on infrastructure projects. IPO interest and growth have further fuelled this upward trend, with new listings attracting substantial investor demand and driving up trading activity,” Gordon noted, while stating that by going public, companies are enjoying advantages like having access to a new revenue stream and an influx of capital, which can be used for expansion, debt reduction, or investing in new projects. The IPO route is also enhancing the company’s visibility and credibility, which can attract more customers and business opportunities.

The post UAE IPOs raise USD 890 million in Q2 2024: Report appeared first on International Finance.

After almost five years in charge, Quinn’s departure from HSBC was abruptly announced in late April. Georges Elhedery’s appointment as CEO, on the other hand, comes less than two years after he was promoted to CFO in January 2023.

According to a statement from the company, he will carry on in his role as group CFO during the transition. His appointment comes as the bank tries to shift from restructuring to growth, at a time when helpful interest rate hikes may have peaked and geopolitical tensions simmer.

Iain Pyle, senior investment director at HSBC shareholder Abrdn, told Reuters that Georges Elhedery had made a good impression on the market over his 18 months as the CFO, and was “a clear communicator”.

“It’s a continuity appointment, but a strong candidate and I think will be taken well today,” he said.

HSBC defeated a resolution in 2023 backed by Chinese insurance giant Ping An and other Hong Kong-based shareholders who were seeking a spin-off of its lucrative Asia business.

Meet Georges Elhedery: A Proven Performer

In 2005, Georges Elhedery joined HSBC. Until January 2023, he served as co-CEO of Global Banking and Markets at HSBC. He then assumed the position of chief financial officer. Apart from this, from July 2016 to February 2019, he oversaw the bank’s operations in Turkey, North Africa, and the Middle East.

After that, he was the co-head of the Global Banking and Markets business, the division that houses HSBC’s trading and investment banking advisory businesses, and accounted for 24% of the group’s revenues in 2023.

HDBC Chairman Mark Tucker stated that Georges Elhedery has a proven track record of leading through change, driving growth, delivering simplification, controlling costs, and bringing a strong focus on execution.

In October 2022, he was unexpectedly appointed CFO, just weeks after returning from a sabbatical, a move that groomed him for the top job.

“I am deeply honoured by the trust placed in me to lead this great institution into the future. Working together with our talented team, I look forward to delivering exceptional value to our clients and investors by driving strong performance on a sustainable growth trajectory,” Georges Elhedery told the media, while reacting upon his promotion as the HSBC CEO.

Quinn, who led HSBC for five years, will remain CEO until Georges Elhedery starts in the role. At the time of his surprise exit announcement in April 2024, he had said he wanted a better work-life balance and planned to pursue a portfolio career. Quinn oversaw a raft of asset sales, navigated a global pandemic and the push by rebel investors to break up the bank, guiding the lender to record profit.

Challenges Await New HSBC CEO

HSBC made a record profit of USD 30 billion in 2023 thanks to two years of interest rate hikes during the global inflation fight. The bank makes more money when it can lend at higher rates than it pays on its USD 1.7 trillion base of deposits.

Half of HSBC’s revenue comes from net interest income, which increased by USD 5.04 billion to almost USD 36 billion in 2023. However, as central banks lower rates, analyst forecasts indicate that it will return to USD 33 billion this year and in 2025.

“For HSBC, like many banks, a key reason for the sub-par valuation is an inherent scepticism around the sustainability of earnings as interest rates come off their peak. Demonstrating the alternative growth levers that can be pulled will be a key to support a re-rating going forward,” Benjie Creelan Sandford, financial equity portfolio manager at Algebris Investments, which holds HSBC shares, said.

If interest-based revenue declines, HSBC will be under more pressure to increase revenue from fee-based services like wealth management. According to the bank’s wealth head Nuno Matos, in a June 2024 investor presentation, net new invested assets rose by 6% to USD 84 billion in 2023, with a 7% gain in wealth revenue from Asia.

In addition to expanding its onshore private banking presence, the bank has invested billions in joint ventures involving securities and insurance in China. Executives said that the company is on track to meet a target of 3,000 wealth managers by 2025, having hired about 1,700 of them in China since 2021.

In China, however, HSBC’s wealth and personal banking division reported an operating loss of USD 90 million for 2023. The wealth pool is predicted to increase much more slowly even as Beijing continues its “common prosperity” campaign to narrow the growing wealth gap in the world’s second-largest economy.

Similarly in its early stages is a plan by the European head of HSBC to focus on inbound expansion by Asian corporate clients. HSBC is particularly vulnerable to deteriorating ties between China and the West because more than half of its yearly profit comes from Hong Kong and Britain. Although it is looking into ways to fully take over its Chinese fund management unit, there are worries Beijing won’t approve it until its tensions with Washington subside.

HSBC’s business model is based on robust international trade flows and increased cross-selling between its regional offices; it fiercely defended this approach in response to demands for a split from its largest shareholder. Even though it is considering reducing its position, the Chinese investor still owns an 8.9% stake in the bank and could cause more issues, according to media reports.

The ongoing bad loan crisis in China, which resulted in a shocking USD 3 billion impairment charge on HSBC’s ownership of Bank of Communications (BoCom) in February 2024, will also be Georges Elhedery’s responsibility to manage. It has been suggested that the indebted property sector in China has peaked, but in May 2024, house prices dropped at the quickest rate in almost ten years.

At the end of 2023, BoCom’s non-performing loan ratio for real estate lending was 4.49%, up from 2.8% at the end of 2022. In general, weaker markets and a slowing Chinese economy have affected HSBC’s performance in Asia. It reported a USD 24 billion decline in assets in the first quarter of this year across Asian customer accounts, primarily at its Hong Kong-based legal entity.

The bank stated that certain customers’ risk aversion and competitive pressures in its commercial, wealth, and international markets businesses were the causes of the decline.

Georges Elhedery has relatively little direct work experience in Asia, having spent the bulk of his HSBC career in roles across its Middle East and Africa businesses, but did learn Mandarin during his six-month sabbatical, according to sources at the bank and media reports.

HSBC, which marketed itself as “the world’s local bank,” has shrunk its empire by selling assets in markets like the United States, France, and Canada. However, some believe that more work needs to be done.

“I think it’s the question of whether the geographical divestments HSBC has already completed…are enough for it to maximise its medium-term returns,” Mike Makdad, senior equity analyst at Morningstar said.

Makdad stated that although global bank capital requirements have been gradually tightened since the 2008 financial crisis, the business model of a multinational bank with retail operations across multiple nations has grown increasingly complex, and HSBC’s profitability is still heavily biased towards Hong Kong.

“So the question for the new CEO is: what kind of bank should HSBC be so that the combination of parts generates the best synergies?” he said.

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Edwin Paalvast, the executive board member and head of international markets at Philips, was present when Bandar Alkhorayef visited the company’s Eindhoven facility. They talked about boosting collaboration in the field of medical devices and bringing this crucial sector to Saudi Arabia.

The purpose of the Saudi minister’s visit to the Netherlands was to strengthen ties and create partnerships in a range of industrial activities between the two nations.

During his visit, Alkhorayef met with FrieslandCampina, a prominent company specialising in dairy products and their byproducts. Conversations were held with Marchel Gorselink, the head of research and development at FrieslandCampina, to discuss the possibility of setting up a research and development hub in the Kingdom to improve the quality of local production and food processing.

The minister also held discussions with David Haines, the CEO of Upfield, regarding potential collaboration in consumer goods and plant-based food manufacturing. They exchanged knowledge to help achieve food security objectives and promote environmental sustainability.

The purpose of this visit is to support growth pathways in promising industries between the two countries and to complement Saudi Arabia’s ongoing efforts to strengthen the role of its mining and industrial sectors in the national economy. Along with increasing the penetration of Saudi non-oil exports into Dutch and European markets, it also aims to draw in high-calibre investments.

Alkhorayef concentrated on bolstering bilateral trade relations and investigating cooperation opportunities in industry, mining, trade, and investment during his meetings with Dutch ministers, including the Minister of Foreign Trade and Development, Liesje Schreinemacher, and the Minister of Economic Affairs and Climate Policy, Micky Adriaansens.

They also talked about forming strategic alliances in a number of industries, such as manufacturing, cutting-edge technology, and renewable energy.

The visit showcases Saudi Arabia’s distinct prospects and competencies in the mining and industrial domains, in addition to its environmental preservation endeavours and climate change programmes, including the Saudi Green and Middle East Green initiatives.

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