August 19, 2024 • 38 mins
The sands are shifting in Saudi Arabia, and foreign investors are taking notice. The desert kingdom is economically reinventing itself, powered by a clear vision for its future, and growth ambitions that extend far beyond oil. Years of insularity and reclusiveness are giving way to greater openness and engagement -- with diversification into tourism and digital technology -- and reminiscent of China's early stirrings two decades ago. Lee Hodgkinson, Chief Strategy Officer of the Saudi Tadawul Group talks to co-hosts David Ingles of Bloomberg Television and Rebecca Sin of Bloomberg Intelligence about why global investors are drawn to Saudi Arabia's growth story.
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Speaker 1 (00:00):
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Speaker 2 (00:18):
Good morning, good afternoon, good evening, and good nights. Wherever
you are in this vast, beautiful planet. You're joining us
from Welcome to Tiger Money, a Bloomberg podcast about all
things investing with a twist on exchange traded funds in
Asia and beyond. I'm your host David Ingless, Chief Markets
Editor for the Asia Pacific at Bloomberg TV. I'm Asto,
the hosts of the China Show. In My co pilots
(00:40):
in this journey as Rebecca sim She's head of Asia
Pacific TTF research at Bloomberg Intelligence. The conversation, of course,
is strictly non confidential, So if you like what you here,
do not forget to subscribe to share and so also look.
Speaker 3 (00:55):
The Middle East has been a very hot spot for investors,
and specifically Soaudi Arabia. In Hong Kong, We've had the
largest ever Saudi Arabia ETF list globally last year and
most recently cross listed into mainland China. Let's bring in
Lee Hodkinson, the group chief strategy officer from Saudi tadal
Wil Group, who has thirty five years of capital market
(01:18):
experience and has worked across Europe, America, China, Russia, India
and now Saudi Arabia. Thank you so much for joining
us here today on Tiger Money.
Speaker 4 (01:27):
Thank you for the opportunity.
Speaker 2 (01:29):
Yeah, Lee, Well, I'm sure in the thirty five years
have been in the industry, I've seen massive change. You know,
Increasingly we hear a lot more and more about Middle East,
more and more about Saudi Arabia, And I'm wondering in
your job, what do you think investors do not get
about Saudi? What is happening and where do you think
this story goes?
Speaker 4 (01:51):
Yeah, look, it's an incredible story. I think regionally as
much as in Saudi, But what's happening in Saudi Araybray's
really astonishing. During my time y s Urinex, I spent
a lot of time with offices in Asia, Japan, Hong Kong, Singapore,
and I spent probably at least four sometimes six trips
a year into China, during those years from sort of
(02:13):
twenty twelve onwards, as we were really capturing outflow and
business coming from the mainland in China, and what I
saw there was, you know, this astonishing transformation of China
into an enormous economy and a global player. And I
always felt that I'd missed out a little bit by
(02:34):
not being on the ground permanently and really being part
of it. And so I took my job two years
ago almost of the day actually, I took my job
in Saudi because I really felt it was a genuine
opportunity for me to have a front row seat at
what is maybe the last transformation of a G twenty nation.
I mean, it's an astonishing opportunity, and you know, hopefully
(02:57):
in my own small way, I can shape a lift
little bit of that and sort of help make things
bigger and better. And what's going on on the ground,
like China went through, is just massive progress. READD to
me feels a lot like Sanjen did fifteen years ago.
There's a new road, there's a new bridge, there's a
new building that there are and I think fourteen Mechelan
(03:19):
style restaurants opening this year alone. I went to the
first opera in Saudi a couple of months ago. There's
fantastic football, there's tennis as formula one. I mean, the
sort of social change and transformation is incredible. Seventy percent
of the country are under thirty five, so there's this
enormous sort of youthful energy and entrepreneurship. So the social
(03:44):
side of thing is incredible. From a business and commercial perspective,
there are enormous opportunities in multiple sectors. Tourism I think
is going to be explosive over the coming years. We
obviously have the new read Air. There are lots and
lots of super five star hotels opening on the West coast.
(04:05):
Healthcare is an enormous sector, mining metals, real estate, capital markets,
you know, close to my heart. We've seen transformation of
the Saudi Todaur Wall Group and the sort of core
exchange five or six years ago be the largest regional
player but not particularly relevant on a global stage. And today,
(04:27):
depending on what the dollars doing, we're eighth or ninth
largest equity market on the planet. And you know our
IPO pipeline. I think we have over fifty applicants this year.
I think twenty three or twenty four already done. Average
daily training volumes are enormous. Every bank, broker, asset manager
you know cycling through my officers are setting up in Saudi.
(04:50):
It's incredible. I have to say. The challenge I think
in capital markets is focus, because you can't do everything
all the time, all at once. So it's really about
prior tization and focus. And the Saudi authorities under Vision
twenty thirty you've got a Financial Services Development Plan which
sort of sets out those priorities and progress is phenomenal.
(05:12):
So I think the opportunity for investors in some respects
is only just beginning. Ten percent of our market is
owned by foreign investors, twenty percent of daily training volume
comes from Asian investors, so there's a whole new stream
of activity. And Rebecca, you refer to the ETF deal
in China, I think that's only just going to continue
(05:34):
to grow.
Speaker 2 (05:36):
To your point, the Kingdom wants to achieve not just
a lot, but a lot on many many fronts. I
guess the next question I have is how does the
exchange How does the group your group get involved in
this change specifically, I.
Speaker 4 (05:49):
Mean, essentially we're at the heart of the capital markets
revolution in the Kingdom. You know, really our strategy falls
along two tracks. The first is to make sure that
we have efficient and liquid markets for issuers and investors
that help drive forward the Vision twenty thirty action plan.
(06:13):
And alongside that, we've got a sort of more self
deterministic goal of growing through diversification as a listed company ourselves.
And that's why you see us making investments into the
Dubai Mercantile Exchange, which will become in September the Golf
Mercantile Exchange. That's why we've acquired majority shareholding in direct FN.
(06:35):
And you know, we're really starting to broaden our horizons
data analytics indices really to start building out a powerful
globally relevant franchise beyond the core equity business.
Speaker 2 (06:48):
Right, Certainly, some of the things that we noticed from
outside looking in. You obviously have one very big company listing.
You have valuations that are either extremely stretched one side,
extremely cheap the other. The perception isn't correct me if
I'm wrong. A lot of the flow is driven by
retail investors, and that might or may or may not
chime in me keep foreign investors that you need away
(07:11):
until part of the piping is sort of cleaned up
and replenished and upgraded. Is that an issue that you're
aware of. Is that an issue at all that you're
looking to address?
Speaker 4 (07:21):
For sure, it's changing, David. You know, once upon a
time the proportion of retail training was over seventy percent.
Now it's sort of around sixty percent, and there are
days where you know there's an equilibrium. We've spent a
lot of time, money, and effort on building out what
I describe as the internationalization, institutionalization, and electronification of our marketplace.
(07:45):
Through our data center, we now have you know, significant
number of international liquidity providers. They're accounting for twenty percent
of market activity. If you think about those firms an
electronically generated business in your accounts of sixty to sixty
five percent of average daily equity markets in read, it's
about twenty percent. We've got a long way to go,
(08:08):
but that's changing, you know, literally every month. So we're
seeing a tremendous amount of electronification, institutionalization, and internationalization coming
to the market. And look, it won't change completely overnight,
but there are very very strong signals that that's now
the sort of makeup of the liquidity on the exchange
(08:29):
is changing dramatically, so.
Speaker 3 (08:31):
We speak about the Tadawil Group. You guys are a
publicly listed company with four main subsidiaries which are at
the Saudi Exchange, the Security Is Clearing Center Company, the
Security Is Depository Center and Vami. There are a lot
of partnership that you guys have. Specifically, the Saudi Exchange
has joined other international exchanges. In Hong Kong, you are
(08:52):
considered a recognized stock exchange as well as some in
mainland China. Could you share with us any insights on
how did this happen, what the background is, and what
are your thoughts.
Speaker 4 (09:02):
Sure, you know, finance traditionally has been an American business,
if you like, or a Western business in large part.
But what we've seen over the last decade, and as
I learned from my time in Asia with NYC Eurinext,
the flows coming out of Asia, China, I think India
is really starting to emerge, you know, obviously Singapore, Hong Kong.
(09:25):
These flows are really really significant, and I think what
we've done with our colleagues in China is to really
begin the process of awakening and marketing the Saudi equity
story to Chinese investors via these ETFs, and that came
about through mutual discussions. Exchange world is quite a small world,
(09:47):
and we all meet each other fairly often, but in
many respects, it was a no brainer. Connecting Chinese and
Saudi investment flows bilaterally. Not only is good for the
exchanges and good for the invest it's also good for
the liquidity of the listed companies. So I think you
can expect a lot more from us and will work
(10:07):
very hard with our Chinese counterparts on those relationships because
the initial success of those products been pretty good. I
think there's another angle as well, which relates to our
thirty two point six percent investment in the Dubai Mercantile Exchange,
and that is that the oil product, the Omani oil product.
The clients are in the East of Suez, so most
(10:29):
of those clients are in India, Singapore, China, and I'm
off at the end of this month on a client
road show in the mainland, in India and around Asia,
really to just to sort of solidify those relationships with
the major clients, but also to sort of explore new opportunities,
particularly in the asset management area, where you know, I
(10:50):
think there's a tremendous upside opportunity in the Middle East
generally and in Saudi we only have nine ETFs listed
at the moment, there's a tremendous upside. Again, if you
look at how US fund managers use ETFs to gain
access to European markets, still quite fragmented, you know, lots
of different withholding taxes. Clearing ETF as a structure is
(11:12):
a great mechanism to gain access. I see that happening
in the Middle East as well, and as to say,
from a Chinese perspective, from an Asian perspective, more broadly,
there's a lot of interest.
Speaker 5 (11:23):
So let's just jump on what you said. You mentioned
that the Saudi Exchange only has nine ETFs with fifty
four million in assets under management. Of those nine ETFs,
two are tracking US equities and the rest is tracking
Saudi companies. There's a lot of talks about cross listing potential.
You know, you mentioned that Asia was one of the first,
So why Asia as opposed to the US or South America.
(11:44):
We've seen a lot of interest coming out of mainland China,
but cross listing potential, what do you see other opportunities
and what could be the next steps in terms of
collaboration with China. For instance, last year's CSOP launched the
largest ever Saudi Arabia ETF in partnership with the Public
Investment Fund, which is a sovereign wealth fund of Saudi Arabia.
And they've recently signed a m or U with major
(12:06):
Chinese state banks. So what can we expect to happen next.
Speaker 4 (12:10):
Yeah, Look, I think geographically for a second, read is
a really well positioned geographical hub to connect East and West,
and you know, the time zones looking to Asia are
quite favorable. And also I think there is an element
of working with the Chinese exchanges and Chinese investors. We're
(12:32):
both doing this for the first time together and we're
not necessarily constrained by legacy. It's quite refreshing for us
to think about creating solutions that make sense for us
in our regional context. And the same is also true
for our Chinese counterparts. So I think we can work
in a more agile and flexible way because not constrained
(12:54):
by the legacy. I think the other interesting factor is
just the sort of sheer size of investment dollars available
that can come from Chinese investors, from Indian investors, from
Asian investors very very significant activity, and we see a
small number of Chinese brokers either opening or looking to
(13:14):
open in the Middle East with read as the hub.
So we're really at the marketing stage. And where could
this go? Well, the answer is the sky's the limit.
It's really for me more about the priority in the
cadence and the timing. But I think the ties there's
a lot of very very serious interest, and I think
I'm right in saying that China is Saudi's largest bilateral
(13:37):
trading partner. They'll always be very strong ties with the America,
of course, but this pivot between East and West I
think opens up a number of very important opportunities. We
would definitely like to see more investment coming into the Kingdom.
ETFs I think provide a really good structure. The idea
of cross listings, the idea of just generally closer time
(14:00):
around investment flows just makes sense for everybody.
Speaker 5 (14:04):
So when do you think the first cross listing of
ETFs will happen in Saudi Arabia?
Speaker 4 (14:09):
Well, I wish I could give you a straight answer.
I mean, I think there's a lot of work going
on between the parties and the regulators. So I think
it will take a while, but it's definitely a priority.
We want to make it happen as soon as we can.
Speaker 5 (14:22):
End of year next year.
Speaker 2 (14:26):
I was going to be nice and ask is it
going to come before the fourth quarter?
Speaker 4 (14:29):
But yeah, look, it's on its way, I think, is
the answer I'd give.
Speaker 2 (14:34):
You, right, And I mean, it's safe to assume that
both sides want this to happen, and it's simply you know,
the I would call breocracy, but it's you know, how
the game is played. That's maybe just determining the timeline.
Speaker 4 (14:46):
Yeah, I think there's often a misunderstanding about these kind
of things that people think, well, both exchanges have an agreement,
so why don't you just cross lists? But actually these
things are underpinned by very robe asked and complex regulatory
relationships because first and foremost, the protection of investors is
(15:08):
critical for both sides, and it's vital that both countries
get that right before launching product, particularly where you know
there's a retail sensitivity to it. So you know, our
view is that will take a conservative and cautious approach,
but that's okay. People underestimate or they overestimate change in
(15:29):
the short term underestimate it in the long term. So
I think our horizon is sort of through a decade.
Really strategically, these are partnerships with Chinese exchanges that we
want to prosper, you know, we want them to endure
for a long time. It's not just a sort of
fast money thing. It's really about building ties along that
pivot that give us an enduring and sustainable business.
Speaker 1 (15:54):
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Speaker 2 (16:11):
I remember one of the conversations I had on and
this was on the TV show also in the podcast,
so the day that the ETF listed Rebecca and you
know this of course in shan Jen and we were
joined on the show subsequently on the podcast by the
CEO of CSOP and one of the questions I asked
her was what's the appeal of this product you're putting
(16:31):
out in the mainland market. And her words, not mine,
it's the ability and paraphrase, it's ability for mail and
investors to get exposure to the oil story in Saudi,
and so I guess, let me building that and ask you,
running the risk of over simplifying things, what is going
on beyond oil and its derivative sectors in Saudi? You know,
(16:51):
what are the opportunities beyond what most people already know?
Speaker 4 (16:56):
Yeah, I mean how long have we got? I mean
it's incredible. I think think non oil economy in Saudi
grew by four point six percent last year. Tourism, healthcare,
real estate, mining, metals. There are a number of very
fast growing, very large sectors in the Saudi economy, and
(17:17):
I think when you're launching a new product in a
new jurisdiction, you need to make sure that you're focused
on the area that makes most sense. So if you
were to stop a Chinese retail investor walking down the
street in Shanghai, Shenzen and say, other than a Ramco,
what are your favorite picks for Saudi stocks? They wouldn't
(17:38):
have a great answer for you. And the same is
true in reverse. So actually what you need to do
is to start with those sort of let's call it
brand recognition, and then when you've got that set of relationships,
then you can build out the other products. And that's
very much the plan and that's why you got the
response you did. Personally, I think tourism just my own
(17:59):
experience to my family traveling around the country. There are
remarkable sites. There are remarkable places in Saudi that the
world has just not really been exposed to. And as
the new airline gets going, as visitors start coming to
the new hotels and tourism expands, as it is already
beyond religious tourism, I think that sector is going to
(18:23):
be offering enormous upside. And the numbers are already huge
in terms of tourists coming to the country and growth.
But I see it continuing. And there are a lot
of big events coming up as well, the Expo, and
I think the Asian Games and hopefully at World Cup
at some point. There are a lot of things going
on that will bring people to the kingdom. And I
(18:47):
think that there's a runway of growth in tourism alone
for many, many many years to come. I mean, if
you look at the story of say somewhere like Dubai
twenty five thirty years ago, the tourism uptick there has
been phenomenal. I see the same thing happening in React,
if not more, I should say the Kingdom because these
natural wonders, the edge of the world and a and
(19:09):
these kind of places are just incredible. They're incredible.
Speaker 2 (19:13):
You know, there are very few places in the world
that have not just a vision, but the resources to
actually back up trying to move the economy in different directions.
You know, they're versifying away from oil for example, in
this case. Does it ever occur to you that money's
an issue? Again, oversimplifying an issue there? People know Saudi
(19:34):
is a very wealthy country. Is money an issue?
Speaker 4 (19:38):
Well, I think the perception of Saudi is different from
the reality. I think it would be a mistake for
international investors listeners to this podcast to be thinking that
there's an unlimited supply of money and money's just thrown around.
That is absolutely not the case. In fact, I would
(19:59):
argue the from my own experience, the way that our
major shareholder is PIF. Our relationship with PIF managed very
very carefully through some very strong connections when we've made acquisitions.
The level of discipline, rigor and governance that we go
through around valuation, around post merger integration KPIs is gold standard,
(20:22):
and you know, it says good, if not better than
some of the other international organizations I've worked for. So
the main takeaway is investment is made carefully, results are measured.
Prioritization I think more recently is taking place that can
only be a good thing. And I think any visitor
to Read or the Kingdom generally would see the fruits
(20:44):
of these investments starting to pay off. And it's coming
through in non oil economy growth.
Speaker 5 (20:50):
So in terms of investments paying off, you guys have
recently entered the commodities market great time in coogles up
one hundred and fifty percent called so we're almost thirty
percent for our listteners. You may not know that there's
around three hundred billion dollars worth of commodities ETF, with
the Spider Gold ETF being the largest at sixty six billion.
But a fun fact for our listeners is that there's
(21:11):
actually a spider Gold Mini ETF which only charges ten
basis points as opposed to forty basis points. So, Lee,
can you tell us about the commodities market, why you
guys decided to enter this and watch an investors know?
Speaker 4 (21:23):
Sure? Remarkably, Saudi is the only G twenty nation without
commodities exchange, and you could argue in some respect that's true. Yeah,
in some respects it should be the first. So when
I arrived a couple of years ago and started working
with my colleagues on strategy, it felt very much to
me that we had an opportunity in the commodity space,
(21:45):
in the context of future oriented growth and sustainable products,
to position ourselves as a regional player with global relevance.
If you think about products like hydrogen green metals, all
of these new few products are going to become the
commodities of the future, battery metals. I felt that we
had a significant opportunity and a real world economy set
(22:08):
of actors that are incredibly powerful and important on the
global stage. The question for us then was well, how
do we realize that? How do we get into that business?
And we chose, and I'm very glad we did. We
chose to partner with CME and the Omanian Dubai Sovereign
Wealth Funds to acquire a stake in Dubai Mercantile Exchange,
(22:30):
just a long history of being the largest physically delivered
crude old contract with a focus on East of Suez clients,
and really our game plan there is to work with
those world class partners on broadening that business away from
just pure play oil into other asset classes as well.
And I think there are absolutely natural links, as Rebecca
(22:53):
pointed out, between pure play commodity business and the listed
companies that we have on our market and those that
we're trying to attract, and also the ETF space. I mean,
I think mini products in the region, mini gold, mini silver,
even you know, mini oil products I think have a
very very big future and will be very very interesting
(23:16):
in years to come in the ETF space.
Speaker 2 (23:19):
What moves do you see yourself and the group making
in the years ahead along those lines of building your
commodity footprint? Is it the partnerships you laid out? Do
you see yourself building something from scratch? Are you looking
to at some point directly acquire some assets for example?
Speaker 4 (23:33):
Yeah, I think M and A will play a bigger
role in our future than it has done in our
past because what we need to do essentially is to
develop non transaction revenues and higher quality earnings. So the
challenge that all exchanges have is building out cyclical downside
protection when interest rates go up and there's rotation into
(23:53):
fixed income products, your equity market calls off, how do
you build out a sustainable, predictable economics. So we're looking
across the derivative space, data analytics, in the post trade
arena as well in terms of collateral management, stopping learning,
all of these things. We've got a defined growth plan,
a lot of organic activities going on, and we'll look
(24:16):
for investments, partnerships and acquisitions where they help accelerate our
strategic plans. We won't be looking for M and A
particularly to sort of bulk up and just get bigger
for the sake of it. It's really about how we
bring competency, capability and capacity to the Kingdom to help
drive all of that transformation. And that was behind our
(24:39):
investment in direct FN, the technology company. You know, fantastic
low cost development centers in places like Sri Lanka and Pakistan,
really really good business diversification, in partnership with seeing ME
and others in commodities. You know, we'll do more of
those things, but they'll be sort of surgical and carefully
thought through, lots of discipline and rigor around value and
(25:01):
post merger integration. But there'll be a lot more of that,
I think than you've seen in the past. And that's
really about us living up to our ambition of becoming
a top three player. That was the I think in
an interview with Bloomberg, I think the Crown Prints a
couple of years ago said that, you know, you had
a big ambition for the Saudi Tadawl Group and the
Kingdom generally to be a top three player in financial market.
(25:23):
So it'll take us while to get there, but we're
well on that path and there's a very very exciting
journey out of us.
Speaker 2 (25:30):
And I'm curious who you see as your major competitors
direct competitors, is you know, does that even you lose
sleep over that? You know, there are a few names
that come to mind when you go, Okay, they're doing
something better. We need to upper a game.
Speaker 4 (25:46):
Yes, a great question. So I don't lose any sleep
over our core markets, franchise, the tail wins from the
transformation and the financial services development, the underlying economy. I
think we'll underpin that business quite nice for the years
to come, and they'll be better years than others and
bumps in the road, but fundamentally I think that's I
(26:06):
feel very good about that business. Where we need to
compete and where we need to fight for businesses in
these other growth areas debt markets and commodities and indices
and data and analytics and post trade, and there I think,
in many cases, the boundaries of competition in modern business
of blur, and it can often be a coopetition model
(26:27):
where you may have a client even that is a
core client in one business, a competitor in another, a
partner in another, and you know, somewhere else in between
and something else. And I think that's all about navigating
the landscape. So if we look at our relationship with
the Chinese exchanges, you know our interests are completely aligned.
They want to create more business and more products and
(26:49):
more investors for their markets, and the same is true
for us. So I think we're very very well positioned
in our core market, think we're very well positioned it regionally.
But where we're going to have to compete more aggressively
as we expand in the years ahead will be in
the international environment. And I think that's where you're seemore
m and a you'll seemore partnership, you'll see more collaboration,
(27:12):
and particularly interestingly, I think is now many of the
GCC nations, the Asian nations, are really becoming quite powerful
on the global stage and are really maturing now into
independent actors in terms of investment, thesis and flows and activity.
Back to my point about READ, we can be a
(27:33):
very compelling neutral pivot between East and West in that regard.
So I don't think it's fanciful in years to come
to consider READ and Sally to NOBAL Group as a
competitor to the European Exchanges for capital raising, for example.
I think that's quite possible. It's not something that people
(27:54):
would have thought conceivable five ten years ago, but I
think it very much is now and why not. You know,
the world is changing, and I think we're not unrealistic
and we're not over ambitious. I think we're quite cautious
and conservative, but we think we can make a difference
on the world stage, and you know, that's what we've
(28:14):
said about doing. And I think Asia plays a very
very significant part in that, and there are all those
sort of demographic and economic arguments for that. But I
think this sort of spirit of coming together and doing
new things for new communities is really really powerful, and
I'm very very bullish about the future.
Speaker 2 (28:35):
You're about to embark on this trip to various parts
of Asia. You've mentioned that at the very top of
the podcast. What would you consider the most low hanging
through the biggest wins. After you conclude that trip, what
do you want to go home with?
Speaker 4 (28:50):
I mean, probably a couple of things. I think the
first thing is from the commodity perspective, we want to
make sure that those major actors in that game understand
our ration now for making the investment and the change
to golf marke and tile exchange, and what our collective
plans are and where we can help them solve real
economy problems you risk transfer and all of those things,
(29:12):
and to really listen to what their needs are, how
can we help, what could we do to help them
grow and generate returns. I think the second thing is
really selling Saudi story, which is part of why I'm
really grateful that you've given us the opportunity today, because
we need to get the story out there on a
global basis, that Saudi is transforming, that the results are real,
(29:35):
that the opportunities are significant, because you know, in some
respects that's a never ending story, right, You've always got
to be selling. But I'm really looking forward to the
opportunity in the mainland Hong Kong and India and Singapore,
to really be meeting with those actors, whether they're in
the commodity space, whether they're intermedrias, whether they're asset managers,
to really be selling the story and finding where the
(29:57):
intersection in sort of mutual ben it is. And we've
done a few of these things. You know, we had
the Capital Market Forum in partnership with the Hong Kong
Exchange earlier this year. It was just a fantastic event,
very very well attended at all levels of the industry,
and we came away from that with some pleasantly surprising
opportunities and ideas for all parts of our business. So
(30:21):
there's a lot of interest and I'm really looking forward
to that trip.
Speaker 2 (30:25):
Is Hong Kong going to be part of that trip?
Because okay, because when you are in town and you
do not give us a shout out and we don't
see you here in the office, ly you know, Rebecca's
going to be quite a town out of our London office.
We guarantee we have better coffee here in our pantrmy.
We have better snacks election And that's just the start.
That's just the start. And I think Rebecca has some
(30:45):
questions right now.
Speaker 5 (30:47):
So you've lived in many places Europe, America, China, Russia,
India and now Saudi Arabia. What's the coolest thing about
living in the Middle East?
Speaker 4 (30:59):
What's the coolest thing? I mean, I'm British, so the
weather's great, opening the curtains every day and seeing blue
sky never gets old for me. My Saudi colleagues love
it when it the odd occasion that it rains and
it's cloudy, But for me, blue sky just makes all
better about life. The other thing I would say is
I've learned a lot about the sense of community in
(31:23):
Saudi life that I think we've lost a little in
certainly in the UK. And I enjoy that sense of
community and belonging that you see every day in Saudi life.
It's a very very warm and welcoming environment, very very
hospitable I found. I found it really nice place to live,
(31:45):
very low crime rate, if any great food, great people,
lots to do. It's really fantastic. No surprise that we're
seeing huge, huge numbers of high net worth individuals leaving
Europe coming to the environments because the quality of living
is fantastic. Unfortunately, I'm a big foodie. This is one
(32:06):
of the reasons why I love Hong Kong and Singapore
so much. The food in read you can't go ten
meters down the street without some version of some coffee, food, pastry, shuama.
So you need to get the exercise in as well.
But it's a really, really great place to live, and
I would encourage listeners to take the plunge, get on
(32:28):
a flight and come and see what's going on, because
it really is quite phenomenal.
Speaker 2 (32:34):
Right, Okay, Well, for first time visitors, say I had
a day, what do I need to hit? What do
I need to see? And for people that come on
a semi regular basis, our sort of familiar have done
the usual, eating the usual food, gone to the usual places.
As someone who lives there, what would you advise that
second group of people, what do they need to do? Yeah?
Speaker 4 (32:55):
I would do two things. I think The old City
of Darya, which is the sort of whether the House
of Sud originates from, is a World Heritage site and
really beautiful, astonishingly well done environment. You can get a
sense of Saudi history and very tastefully a number of
(33:17):
world class restaurants and sort of the Hacker Sands and
the mazes and this kind of stuff. So having an
afternoon there at sunset in particular is a beautiful thing.
The other thing that I would do is I would
get a tour to the edge of the World, which is,
you know, I suppose a version of the Grand Canyon
that no one ever has heard about outside the Kingdom,
(33:38):
and it is quite spectacular. You can get a tour
out there, have dinner on the cliff edge and you
look out over the sort of plateau below you which
stretches a thousand miles or so. Again, you know, sunset
experience is absolutely fantastic. So they're the things that you
can do for a day. In read you possibly could
do both in a day, but it would be a
(33:59):
bit of a stretch, but particularly late afternoon. They are
incredible places and anyone who follows me on LinkedIn, I
always post when I take visitors there. They're quite remarkable.
Speaker 5 (34:11):
David and I are both football fans. For those that
may not know. Before David became a famous TV host,
he was a famous footballer and played for the Philippines.
So have you seen Ronaldo play football?
Speaker 2 (34:23):
I'm not gonna let her get away with that. Okay,
since you brought it up. Rebecca for listeners as well,
used to also play for the national team for the
Hong Kong team. He thought that you'd sneak that in. Huh.
Speaker 5 (34:35):
David is a very great footballer, much better than I am.
But Lee, have you seen Ronaldo play? Yeah?
Speaker 2 (34:41):
Have you seen Ronaldo player?
Speaker 4 (34:42):
Plea, well, I have not. I am an Alkhalal fan,
which are Ronaldo's big rivals, and I'm glad to say
I think pretty much on every occasion we've beaten Ronaldo's team.
I have to be careful what I say because a
lot of my colleagues are big fans of Ronaldo and
his supporters. But I'm feeling pretty good season. And you know,
I became a Tottenham Hotspur fan in nineteen seventy eight,
(35:05):
so I've got a lot of disappointment of a you know,
forty plus years of being a Tottenham fan. So I
ask people, don't begrudge me my moment of glory as
an Akhalal fan. And I saw them win the league
and yeah, it was a novel experience for me to
see what the trophy looks like as a Tottenham fan.
So I'm pretty happy, hopefully we're going to see some
(35:25):
more big signings in Saudi. Who knows needs? Oh, well,
I would love to see Mo Salah. I think he's
a fantastic striker. This one thing I would say, the
stadiums and the general ambience and spirit of watching football
in Sally is also a brilliant, brilliant experience. Al Helao
is jam packed at every home game. Quality of football
(35:48):
is good. It's a brilliant environment. Lots of families, lots
of female spectators. It's a really really good environment. Another
good reason to visit the Kingdom.
Speaker 2 (35:58):
Well, let me ask you where your heart is read Land.
Club wise, you mentioned big name transfers. How would you
feel if the Korean lad human Swan moved from Spurs
to Al Hilal Would you be happy? Would you be?
Speaker 5 (36:10):
Said?
Speaker 4 (36:11):
I think I would be happy. Son has been an
amazing player for Tottenham and you know we love him
for sure. I'd love to see his pay in the
Saudi League. I think he did brilliantly so and you
know the challenge with being a Spurs fan is the
hope that kills you. So you know, I now just
take every day as it comes, and yeah, it's a
(36:35):
beautiful day. It's a beautiful day in London. I'm not
going to get depressed.
Speaker 6 (36:39):
Yeah, thank you so much, Lee for joining us from
our London office. We were thrilled by this conversation, especially
lovely football and tourism tips that you gave us, and
we look forward to when you come to Hong Kong.
We hoped to have a meal with you, or when
maybe Dave Night get the opportunity to go to Saudi
Arabia and maybe watch a football match.
Speaker 4 (37:00):
You will be very very welcome, and we'd be sure
to hit those tourists hotspots and I make sure you
get the right food too.
Speaker 2 (37:07):
Fantastic, and we'll make sure we're more we're there for
more than a day. It looks like it's a ton
of dude not worth squeezing into.
Speaker 4 (37:15):
That sunny read, but sunny react. It is a huge
country with incredible incredible singer.
Speaker 2 (37:22):
Okay, so one of the assignments is we see in
the office here is I'm gonna drag my boss down
from the stairs and then you're gonna convince him to
set me loose, give me a three week call a
day and not charge me for it. Leave fantastic, Thank you,
Thank you, so much for your time. To our listeners,
thank you for listening to Tiger Money, your Bloomberg podcast
about investing funds in financial markets in Asia and beyond.
(37:42):
If you like what you here, please do not forget
to subscribe, to like and to share. Until next time.
You can find us inside the Bloomberg terminal or on LinkedIn,
and we look forward to hearing from all of you.
This podcast was produced by Clara Champ.
This podcast is brought to you by HKX, Asia's ETF marketplace. Well,
you'll find a gateway to liquidity and a diverse selection
of opportunities across asset classes, sectors and themes in Asia
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Speaker 2 (00:18):
Good morning, good afternoon, good evening, and good nights. Wherever
you are in this vast, beautiful planet. You're joining us
from Welcome to Tiger Money, a Bloomberg podcast about all
things investing with a twist on exchange traded funds in
Asia and beyond. I'm your host David Ingless, Chief Markets
Editor for the Asia Pacific at Bloomberg TV. I'm Asto,
the hosts of the China Show. In My co pilots
(00:40):
in this journey as Rebecca sim She's head of Asia
Pacific TTF research at Bloomberg Intelligence. The conversation, of course,
is strictly non confidential, So if you like what you here,
do not forget to subscribe to share and so also look.
Speaker 3 (00:55):
The Middle East has been a very hot spot for investors,
and specifically Soaudi Arabia. In Hong Kong, We've had the
largest ever Saudi Arabia ETF list globally last year and
most recently cross listed into mainland China. Let's bring in
Lee Hodkinson, the group chief strategy officer from Saudi tadal
Wil Group, who has thirty five years of capital market
(01:18):
experience and has worked across Europe, America, China, Russia, India
and now Saudi Arabia. Thank you so much for joining
us here today on Tiger Money.
Speaker 4 (01:27):
Thank you for the opportunity.
Speaker 2 (01:29):
Yeah, Lee, Well, I'm sure in the thirty five years
have been in the industry, I've seen massive change. You know,
Increasingly we hear a lot more and more about Middle East,
more and more about Saudi Arabia, And I'm wondering in
your job, what do you think investors do not get
about Saudi? What is happening and where do you think
this story goes?
Speaker 4 (01:51):
Yeah, look, it's an incredible story. I think regionally as
much as in Saudi, But what's happening in Saudi Araybray's
really astonishing. During my time y s Urinex, I spent
a lot of time with offices in Asia, Japan, Hong Kong, Singapore,
and I spent probably at least four sometimes six trips
a year into China, during those years from sort of
(02:13):
twenty twelve onwards, as we were really capturing outflow and
business coming from the mainland in China, and what I
saw there was, you know, this astonishing transformation of China
into an enormous economy and a global player. And I
always felt that I'd missed out a little bit by
(02:34):
not being on the ground permanently and really being part
of it. And so I took my job two years
ago almost of the day actually, I took my job
in Saudi because I really felt it was a genuine
opportunity for me to have a front row seat at
what is maybe the last transformation of a G twenty nation.
I mean, it's an astonishing opportunity, and you know, hopefully
(02:57):
in my own small way, I can shape a lift
little bit of that and sort of help make things
bigger and better. And what's going on on the ground,
like China went through, is just massive progress. READD to
me feels a lot like Sanjen did fifteen years ago.
There's a new road, there's a new bridge, there's a
new building that there are and I think fourteen Mechelan
(03:19):
style restaurants opening this year alone. I went to the
first opera in Saudi a couple of months ago. There's
fantastic football, there's tennis as formula one. I mean, the
sort of social change and transformation is incredible. Seventy percent
of the country are under thirty five, so there's this
enormous sort of youthful energy and entrepreneurship. So the social
(03:44):
side of thing is incredible. From a business and commercial perspective,
there are enormous opportunities in multiple sectors. Tourism I think
is going to be explosive over the coming years. We
obviously have the new read Air. There are lots and
lots of super five star hotels opening on the West coast.
(04:05):
Healthcare is an enormous sector, mining metals, real estate, capital markets,
you know, close to my heart. We've seen transformation of
the Saudi Todaur Wall Group and the sort of core
exchange five or six years ago be the largest regional
player but not particularly relevant on a global stage. And today,
(04:27):
depending on what the dollars doing, we're eighth or ninth
largest equity market on the planet. And you know our
IPO pipeline. I think we have over fifty applicants this year.
I think twenty three or twenty four already done. Average
daily training volumes are enormous. Every bank, broker, asset manager
you know cycling through my officers are setting up in Saudi.
(04:50):
It's incredible. I have to say. The challenge I think
in capital markets is focus, because you can't do everything
all the time, all at once. So it's really about
prior tization and focus. And the Saudi authorities under Vision
twenty thirty you've got a Financial Services Development Plan which
sort of sets out those priorities and progress is phenomenal.
(05:12):
So I think the opportunity for investors in some respects
is only just beginning. Ten percent of our market is
owned by foreign investors, twenty percent of daily training volume
comes from Asian investors, so there's a whole new stream
of activity. And Rebecca, you refer to the ETF deal
in China, I think that's only just going to continue
(05:34):
to grow.
Speaker 2 (05:36):
To your point, the Kingdom wants to achieve not just
a lot, but a lot on many many fronts. I
guess the next question I have is how does the
exchange How does the group your group get involved in
this change specifically, I.
Speaker 4 (05:49):
Mean, essentially we're at the heart of the capital markets
revolution in the Kingdom. You know, really our strategy falls
along two tracks. The first is to make sure that
we have efficient and liquid markets for issuers and investors
that help drive forward the Vision twenty thirty action plan.
(06:13):
And alongside that, we've got a sort of more self
deterministic goal of growing through diversification as a listed company ourselves.
And that's why you see us making investments into the
Dubai Mercantile Exchange, which will become in September the Golf
Mercantile Exchange. That's why we've acquired majority shareholding in direct FN.
(06:35):
And you know, we're really starting to broaden our horizons
data analytics indices really to start building out a powerful
globally relevant franchise beyond the core equity business.
Speaker 2 (06:48):
Right, Certainly, some of the things that we noticed from
outside looking in. You obviously have one very big company listing.
You have valuations that are either extremely stretched one side,
extremely cheap the other. The perception isn't correct me if
I'm wrong. A lot of the flow is driven by
retail investors, and that might or may or may not
chime in me keep foreign investors that you need away
(07:11):
until part of the piping is sort of cleaned up
and replenished and upgraded. Is that an issue that you're
aware of. Is that an issue at all that you're
looking to address?
Speaker 4 (07:21):
For sure, it's changing, David. You know, once upon a
time the proportion of retail training was over seventy percent.
Now it's sort of around sixty percent, and there are
days where you know there's an equilibrium. We've spent a
lot of time, money, and effort on building out what
I describe as the internationalization, institutionalization, and electronification of our marketplace.
(07:45):
Through our data center, we now have you know, significant
number of international liquidity providers. They're accounting for twenty percent
of market activity. If you think about those firms an
electronically generated business in your accounts of sixty to sixty
five percent of average daily equity markets in read, it's
about twenty percent. We've got a long way to go,
(08:08):
but that's changing, you know, literally every month. So we're
seeing a tremendous amount of electronification, institutionalization, and internationalization coming
to the market. And look, it won't change completely overnight,
but there are very very strong signals that that's now
the sort of makeup of the liquidity on the exchange
(08:29):
is changing dramatically, so.
Speaker 3 (08:31):
We speak about the Tadawil Group. You guys are a
publicly listed company with four main subsidiaries which are at
the Saudi Exchange, the Security Is Clearing Center Company, the
Security Is Depository Center and Vami. There are a lot
of partnership that you guys have. Specifically, the Saudi Exchange
has joined other international exchanges. In Hong Kong, you are
(08:52):
considered a recognized stock exchange as well as some in
mainland China. Could you share with us any insights on
how did this happen, what the background is, and what
are your thoughts.
Speaker 4 (09:02):
Sure, you know, finance traditionally has been an American business,
if you like, or a Western business in large part.
But what we've seen over the last decade, and as
I learned from my time in Asia with NYC Eurinext,
the flows coming out of Asia, China, I think India
is really starting to emerge, you know, obviously Singapore, Hong Kong.
(09:25):
These flows are really really significant, and I think what
we've done with our colleagues in China is to really
begin the process of awakening and marketing the Saudi equity
story to Chinese investors via these ETFs, and that came
about through mutual discussions. Exchange world is quite a small world,
(09:47):
and we all meet each other fairly often, but in
many respects, it was a no brainer. Connecting Chinese and
Saudi investment flows bilaterally. Not only is good for the
exchanges and good for the invest it's also good for
the liquidity of the listed companies. So I think you
can expect a lot more from us and will work
(10:07):
very hard with our Chinese counterparts on those relationships because
the initial success of those products been pretty good. I
think there's another angle as well, which relates to our
thirty two point six percent investment in the Dubai Mercantile Exchange,
and that is that the oil product, the Omani oil product.
The clients are in the East of Suez, so most
(10:29):
of those clients are in India, Singapore, China, and I'm
off at the end of this month on a client
road show in the mainland, in India and around Asia,
really to just to sort of solidify those relationships with
the major clients, but also to sort of explore new opportunities,
particularly in the asset management area, where you know, I
(10:50):
think there's a tremendous upside opportunity in the Middle East
generally and in Saudi we only have nine ETFs listed
at the moment, there's a tremendous upside. Again, if you
look at how US fund managers use ETFs to gain
access to European markets, still quite fragmented, you know, lots
of different withholding taxes. Clearing ETF as a structure is
(11:12):
a great mechanism to gain access. I see that happening
in the Middle East as well, and as to say,
from a Chinese perspective, from an Asian perspective, more broadly,
there's a lot of interest.
Speaker 5 (11:23):
So let's just jump on what you said. You mentioned
that the Saudi Exchange only has nine ETFs with fifty
four million in assets under management. Of those nine ETFs,
two are tracking US equities and the rest is tracking
Saudi companies. There's a lot of talks about cross listing potential.
You know, you mentioned that Asia was one of the first,
So why Asia as opposed to the US or South America.
(11:44):
We've seen a lot of interest coming out of mainland China,
but cross listing potential, what do you see other opportunities
and what could be the next steps in terms of
collaboration with China. For instance, last year's CSOP launched the
largest ever Saudi Arabia ETF in partnership with the Public
Investment Fund, which is a sovereign wealth fund of Saudi Arabia.
And they've recently signed a m or U with major
(12:06):
Chinese state banks. So what can we expect to happen next.
Speaker 4 (12:10):
Yeah, Look, I think geographically for a second, read is
a really well positioned geographical hub to connect East and West,
and you know, the time zones looking to Asia are
quite favorable. And also I think there is an element
of working with the Chinese exchanges and Chinese investors. We're
(12:32):
both doing this for the first time together and we're
not necessarily constrained by legacy. It's quite refreshing for us
to think about creating solutions that make sense for us
in our regional context. And the same is also true
for our Chinese counterparts. So I think we can work
in a more agile and flexible way because not constrained
(12:54):
by the legacy. I think the other interesting factor is
just the sort of sheer size of investment dollars available
that can come from Chinese investors, from Indian investors, from
Asian investors very very significant activity, and we see a
small number of Chinese brokers either opening or looking to
(13:14):
open in the Middle East with read as the hub.
So we're really at the marketing stage. And where could
this go? Well, the answer is the sky's the limit.
It's really for me more about the priority in the
cadence and the timing. But I think the ties there's
a lot of very very serious interest, and I think
I'm right in saying that China is Saudi's largest bilateral
(13:37):
trading partner. They'll always be very strong ties with the America,
of course, but this pivot between East and West I
think opens up a number of very important opportunities. We
would definitely like to see more investment coming into the Kingdom.
ETFs I think provide a really good structure. The idea
of cross listings, the idea of just generally closer time
(14:00):
around investment flows just makes sense for everybody.
Speaker 5 (14:04):
So when do you think the first cross listing of
ETFs will happen in Saudi Arabia?
Speaker 4 (14:09):
Well, I wish I could give you a straight answer.
I mean, I think there's a lot of work going
on between the parties and the regulators. So I think
it will take a while, but it's definitely a priority.
We want to make it happen as soon as we can.
Speaker 5 (14:22):
End of year next year.
Speaker 2 (14:26):
I was going to be nice and ask is it
going to come before the fourth quarter?
Speaker 4 (14:29):
But yeah, look, it's on its way, I think, is
the answer I'd give.
Speaker 2 (14:34):
You, right, And I mean, it's safe to assume that
both sides want this to happen, and it's simply you know,
the I would call breocracy, but it's you know, how
the game is played. That's maybe just determining the timeline.
Speaker 4 (14:46):
Yeah, I think there's often a misunderstanding about these kind
of things that people think, well, both exchanges have an agreement,
so why don't you just cross lists? But actually these
things are underpinned by very robe asked and complex regulatory
relationships because first and foremost, the protection of investors is
(15:08):
critical for both sides, and it's vital that both countries
get that right before launching product, particularly where you know
there's a retail sensitivity to it. So you know, our
view is that will take a conservative and cautious approach,
but that's okay. People underestimate or they overestimate change in
(15:29):
the short term underestimate it in the long term. So
I think our horizon is sort of through a decade.
Really strategically, these are partnerships with Chinese exchanges that we
want to prosper, you know, we want them to endure
for a long time. It's not just a sort of
fast money thing. It's really about building ties along that
pivot that give us an enduring and sustainable business.
Speaker 1 (15:54):
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Speaker 2 (16:11):
I remember one of the conversations I had on and
this was on the TV show also in the podcast,
so the day that the ETF listed Rebecca and you
know this of course in shan Jen and we were
joined on the show subsequently on the podcast by the
CEO of CSOP and one of the questions I asked
her was what's the appeal of this product you're putting
(16:31):
out in the mainland market. And her words, not mine,
it's the ability and paraphrase, it's ability for mail and
investors to get exposure to the oil story in Saudi,
and so I guess, let me building that and ask you,
running the risk of over simplifying things, what is going
on beyond oil and its derivative sectors in Saudi? You know,
(16:51):
what are the opportunities beyond what most people already know?
Speaker 4 (16:56):
Yeah, I mean how long have we got? I mean
it's incredible. I think think non oil economy in Saudi
grew by four point six percent last year. Tourism, healthcare,
real estate, mining, metals. There are a number of very
fast growing, very large sectors in the Saudi economy, and
(17:17):
I think when you're launching a new product in a
new jurisdiction, you need to make sure that you're focused
on the area that makes most sense. So if you
were to stop a Chinese retail investor walking down the
street in Shanghai, Shenzen and say, other than a Ramco,
what are your favorite picks for Saudi stocks? They wouldn't
(17:38):
have a great answer for you. And the same is
true in reverse. So actually what you need to do
is to start with those sort of let's call it
brand recognition, and then when you've got that set of relationships,
then you can build out the other products. And that's
very much the plan and that's why you got the
response you did. Personally, I think tourism just my own
(17:59):
experience to my family traveling around the country. There are
remarkable sites. There are remarkable places in Saudi that the
world has just not really been exposed to. And as
the new airline gets going, as visitors start coming to
the new hotels and tourism expands, as it is already
beyond religious tourism, I think that sector is going to
(18:23):
be offering enormous upside. And the numbers are already huge
in terms of tourists coming to the country and growth.
But I see it continuing. And there are a lot
of big events coming up as well, the Expo, and
I think the Asian Games and hopefully at World Cup
at some point. There are a lot of things going
on that will bring people to the kingdom. And I
(18:47):
think that there's a runway of growth in tourism alone
for many, many many years to come. I mean, if
you look at the story of say somewhere like Dubai
twenty five thirty years ago, the tourism uptick there has
been phenomenal. I see the same thing happening in React,
if not more, I should say the Kingdom because these
natural wonders, the edge of the world and a and
(19:09):
these kind of places are just incredible. They're incredible.
Speaker 2 (19:13):
You know, there are very few places in the world
that have not just a vision, but the resources to
actually back up trying to move the economy in different directions.
You know, they're versifying away from oil for example, in
this case. Does it ever occur to you that money's
an issue? Again, oversimplifying an issue there? People know Saudi
(19:34):
is a very wealthy country. Is money an issue?
Speaker 4 (19:38):
Well, I think the perception of Saudi is different from
the reality. I think it would be a mistake for
international investors listeners to this podcast to be thinking that
there's an unlimited supply of money and money's just thrown around.
That is absolutely not the case. In fact, I would
(19:59):
argue the from my own experience, the way that our
major shareholder is PIF. Our relationship with PIF managed very
very carefully through some very strong connections when we've made acquisitions.
The level of discipline, rigor and governance that we go
through around valuation, around post merger integration KPIs is gold standard,
(20:22):
and you know, it says good, if not better than
some of the other international organizations I've worked for. So
the main takeaway is investment is made carefully, results are measured.
Prioritization I think more recently is taking place that can
only be a good thing. And I think any visitor
to Read or the Kingdom generally would see the fruits
(20:44):
of these investments starting to pay off. And it's coming
through in non oil economy growth.
Speaker 5 (20:50):
So in terms of investments paying off, you guys have
recently entered the commodities market great time in coogles up
one hundred and fifty percent called so we're almost thirty
percent for our listteners. You may not know that there's
around three hundred billion dollars worth of commodities ETF, with
the Spider Gold ETF being the largest at sixty six billion.
But a fun fact for our listeners is that there's
(21:11):
actually a spider Gold Mini ETF which only charges ten
basis points as opposed to forty basis points. So, Lee,
can you tell us about the commodities market, why you
guys decided to enter this and watch an investors know?
Speaker 4 (21:23):
Sure? Remarkably, Saudi is the only G twenty nation without
commodities exchange, and you could argue in some respect that's true. Yeah,
in some respects it should be the first. So when
I arrived a couple of years ago and started working
with my colleagues on strategy, it felt very much to
me that we had an opportunity in the commodity space,
(21:45):
in the context of future oriented growth and sustainable products,
to position ourselves as a regional player with global relevance.
If you think about products like hydrogen green metals, all
of these new few products are going to become the
commodities of the future, battery metals. I felt that we
had a significant opportunity and a real world economy set
(22:08):
of actors that are incredibly powerful and important on the
global stage. The question for us then was well, how
do we realize that? How do we get into that business?
And we chose, and I'm very glad we did. We
chose to partner with CME and the Omanian Dubai Sovereign
Wealth Funds to acquire a stake in Dubai Mercantile Exchange,
(22:30):
just a long history of being the largest physically delivered
crude old contract with a focus on East of Suez clients,
and really our game plan there is to work with
those world class partners on broadening that business away from
just pure play oil into other asset classes as well.
And I think there are absolutely natural links, as Rebecca
(22:53):
pointed out, between pure play commodity business and the listed
companies that we have on our market and those that
we're trying to attract, and also the ETF space. I mean,
I think mini products in the region, mini gold, mini silver,
even you know, mini oil products I think have a
very very big future and will be very very interesting
(23:16):
in years to come in the ETF space.
Speaker 2 (23:19):
What moves do you see yourself and the group making
in the years ahead along those lines of building your
commodity footprint? Is it the partnerships you laid out? Do
you see yourself building something from scratch? Are you looking
to at some point directly acquire some assets for example?
Speaker 4 (23:33):
Yeah, I think M and A will play a bigger
role in our future than it has done in our
past because what we need to do essentially is to
develop non transaction revenues and higher quality earnings. So the
challenge that all exchanges have is building out cyclical downside
protection when interest rates go up and there's rotation into
(23:53):
fixed income products, your equity market calls off, how do
you build out a sustainable, predictable economics. So we're looking
across the derivative space, data analytics, in the post trade
arena as well in terms of collateral management, stopping learning,
all of these things. We've got a defined growth plan,
a lot of organic activities going on, and we'll look
(24:16):
for investments, partnerships and acquisitions where they help accelerate our
strategic plans. We won't be looking for M and A
particularly to sort of bulk up and just get bigger
for the sake of it. It's really about how we
bring competency, capability and capacity to the Kingdom to help
drive all of that transformation. And that was behind our
(24:39):
investment in direct FN, the technology company. You know, fantastic
low cost development centers in places like Sri Lanka and Pakistan,
really really good business diversification, in partnership with seeing ME
and others in commodities. You know, we'll do more of
those things, but they'll be sort of surgical and carefully
thought through, lots of discipline and rigor around value and
(25:01):
post merger integration. But there'll be a lot more of that,
I think than you've seen in the past. And that's
really about us living up to our ambition of becoming
a top three player. That was the I think in
an interview with Bloomberg, I think the Crown Prints a
couple of years ago said that, you know, you had
a big ambition for the Saudi Tadawl Group and the
Kingdom generally to be a top three player in financial market.
(25:23):
So it'll take us while to get there, but we're
well on that path and there's a very very exciting
journey out of us.
Speaker 2 (25:30):
And I'm curious who you see as your major competitors
direct competitors, is you know, does that even you lose
sleep over that? You know, there are a few names
that come to mind when you go, Okay, they're doing
something better. We need to upper a game.
Speaker 4 (25:46):
Yes, a great question. So I don't lose any sleep
over our core markets, franchise, the tail wins from the
transformation and the financial services development, the underlying economy. I
think we'll underpin that business quite nice for the years
to come, and they'll be better years than others and
bumps in the road, but fundamentally I think that's I
(26:06):
feel very good about that business. Where we need to
compete and where we need to fight for businesses in
these other growth areas debt markets and commodities and indices
and data and analytics and post trade, and there I think,
in many cases, the boundaries of competition in modern business
of blur, and it can often be a coopetition model
(26:27):
where you may have a client even that is a
core client in one business, a competitor in another, a
partner in another, and you know, somewhere else in between
and something else. And I think that's all about navigating
the landscape. So if we look at our relationship with
the Chinese exchanges, you know our interests are completely aligned.
They want to create more business and more products and
(26:49):
more investors for their markets, and the same is true
for us. So I think we're very very well positioned
in our core market, think we're very well positioned it regionally.
But where we're going to have to compete more aggressively
as we expand in the years ahead will be in
the international environment. And I think that's where you're seemore
m and a you'll seemore partnership, you'll see more collaboration,
(27:12):
and particularly interestingly, I think is now many of the
GCC nations, the Asian nations, are really becoming quite powerful
on the global stage and are really maturing now into
independent actors in terms of investment, thesis and flows and activity.
Back to my point about READ, we can be a
(27:33):
very compelling neutral pivot between East and West in that regard.
So I don't think it's fanciful in years to come
to consider READ and Sally to NOBAL Group as a
competitor to the European Exchanges for capital raising, for example.
I think that's quite possible. It's not something that people
(27:54):
would have thought conceivable five ten years ago, but I
think it very much is now and why not. You know,
the world is changing, and I think we're not unrealistic
and we're not over ambitious. I think we're quite cautious
and conservative, but we think we can make a difference
on the world stage, and you know, that's what we've
(28:14):
said about doing. And I think Asia plays a very
very significant part in that, and there are all those
sort of demographic and economic arguments for that. But I
think this sort of spirit of coming together and doing
new things for new communities is really really powerful, and
I'm very very bullish about the future.
Speaker 2 (28:35):
You're about to embark on this trip to various parts
of Asia. You've mentioned that at the very top of
the podcast. What would you consider the most low hanging
through the biggest wins. After you conclude that trip, what
do you want to go home with?
Speaker 4 (28:50):
I mean, probably a couple of things. I think the
first thing is from the commodity perspective, we want to
make sure that those major actors in that game understand
our ration now for making the investment and the change
to golf marke and tile exchange, and what our collective
plans are and where we can help them solve real
economy problems you risk transfer and all of those things,
(29:12):
and to really listen to what their needs are, how
can we help, what could we do to help them
grow and generate returns. I think the second thing is
really selling Saudi story, which is part of why I'm
really grateful that you've given us the opportunity today, because
we need to get the story out there on a
global basis, that Saudi is transforming, that the results are real,
(29:35):
that the opportunities are significant, because you know, in some
respects that's a never ending story, right, You've always got
to be selling. But I'm really looking forward to the
opportunity in the mainland Hong Kong and India and Singapore,
to really be meeting with those actors, whether they're in
the commodity space, whether they're intermedrias, whether they're asset managers,
to really be selling the story and finding where the
(29:57):
intersection in sort of mutual ben it is. And we've
done a few of these things. You know, we had
the Capital Market Forum in partnership with the Hong Kong
Exchange earlier this year. It was just a fantastic event,
very very well attended at all levels of the industry,
and we came away from that with some pleasantly surprising
opportunities and ideas for all parts of our business. So
(30:21):
there's a lot of interest and I'm really looking forward
to that trip.
Speaker 2 (30:25):
Is Hong Kong going to be part of that trip?
Because okay, because when you are in town and you
do not give us a shout out and we don't
see you here in the office, ly you know, Rebecca's
going to be quite a town out of our London office.
We guarantee we have better coffee here in our pantrmy.
We have better snacks election And that's just the start.
That's just the start. And I think Rebecca has some
(30:45):
questions right now.
Speaker 5 (30:47):
So you've lived in many places Europe, America, China, Russia,
India and now Saudi Arabia. What's the coolest thing about
living in the Middle East?
Speaker 4 (30:59):
What's the coolest thing? I mean, I'm British, so the
weather's great, opening the curtains every day and seeing blue
sky never gets old for me. My Saudi colleagues love
it when it the odd occasion that it rains and
it's cloudy, But for me, blue sky just makes all
better about life. The other thing I would say is
I've learned a lot about the sense of community in
(31:23):
Saudi life that I think we've lost a little in
certainly in the UK. And I enjoy that sense of
community and belonging that you see every day in Saudi life.
It's a very very warm and welcoming environment, very very
hospitable I found. I found it really nice place to live,
(31:45):
very low crime rate, if any great food, great people,
lots to do. It's really fantastic. No surprise that we're
seeing huge, huge numbers of high net worth individuals leaving
Europe coming to the environments because the quality of living
is fantastic. Unfortunately, I'm a big foodie. This is one
(32:06):
of the reasons why I love Hong Kong and Singapore
so much. The food in read you can't go ten
meters down the street without some version of some coffee, food, pastry, shuama.
So you need to get the exercise in as well.
But it's a really, really great place to live, and
I would encourage listeners to take the plunge, get on
(32:28):
a flight and come and see what's going on, because
it really is quite phenomenal.
Speaker 2 (32:34):
Right, Okay, Well, for first time visitors, say I had
a day, what do I need to hit? What do
I need to see? And for people that come on
a semi regular basis, our sort of familiar have done
the usual, eating the usual food, gone to the usual places.
As someone who lives there, what would you advise that
second group of people, what do they need to do? Yeah?
Speaker 4 (32:55):
I would do two things. I think The old City
of Darya, which is the sort of whether the House
of Sud originates from, is a World Heritage site and
really beautiful, astonishingly well done environment. You can get a
sense of Saudi history and very tastefully a number of
(33:17):
world class restaurants and sort of the Hacker Sands and
the mazes and this kind of stuff. So having an
afternoon there at sunset in particular is a beautiful thing.
The other thing that I would do is I would
get a tour to the edge of the World, which is,
you know, I suppose a version of the Grand Canyon
that no one ever has heard about outside the Kingdom,
(33:38):
and it is quite spectacular. You can get a tour
out there, have dinner on the cliff edge and you
look out over the sort of plateau below you which
stretches a thousand miles or so. Again, you know, sunset
experience is absolutely fantastic. So they're the things that you
can do for a day. In read you possibly could
do both in a day, but it would be a
(33:59):
bit of a stretch, but particularly late afternoon. They are
incredible places and anyone who follows me on LinkedIn, I
always post when I take visitors there. They're quite remarkable.
Speaker 5 (34:11):
David and I are both football fans. For those that
may not know. Before David became a famous TV host,
he was a famous footballer and played for the Philippines.
So have you seen Ronaldo play football?
Speaker 2 (34:23):
I'm not gonna let her get away with that. Okay,
since you brought it up. Rebecca for listeners as well,
used to also play for the national team for the
Hong Kong team. He thought that you'd sneak that in. Huh.
Speaker 5 (34:35):
David is a very great footballer, much better than I am.
But Lee, have you seen Ronaldo play? Yeah?
Speaker 2 (34:41):
Have you seen Ronaldo player?
Speaker 4 (34:42):
Plea, well, I have not. I am an Alkhalal fan,
which are Ronaldo's big rivals, and I'm glad to say
I think pretty much on every occasion we've beaten Ronaldo's team.
I have to be careful what I say because a
lot of my colleagues are big fans of Ronaldo and
his supporters. But I'm feeling pretty good season. And you know,
I became a Tottenham Hotspur fan in nineteen seventy eight,
(35:05):
so I've got a lot of disappointment of a you know,
forty plus years of being a Tottenham fan. So I
ask people, don't begrudge me my moment of glory as
an Akhalal fan. And I saw them win the league
and yeah, it was a novel experience for me to
see what the trophy looks like as a Tottenham fan.
So I'm pretty happy, hopefully we're going to see some
(35:25):
more big signings in Saudi. Who knows needs? Oh, well,
I would love to see Mo Salah. I think he's
a fantastic striker. This one thing I would say, the
stadiums and the general ambience and spirit of watching football
in Sally is also a brilliant, brilliant experience. Al Helao
is jam packed at every home game. Quality of football
(35:48):
is good. It's a brilliant environment. Lots of families, lots
of female spectators. It's a really really good environment. Another
good reason to visit the Kingdom.
Speaker 2 (35:58):
Well, let me ask you where your heart is read Land.
Club wise, you mentioned big name transfers. How would you
feel if the Korean lad human Swan moved from Spurs
to Al Hilal Would you be happy? Would you be?
Speaker 5 (36:10):
Said?
Speaker 4 (36:11):
I think I would be happy. Son has been an
amazing player for Tottenham and you know we love him
for sure. I'd love to see his pay in the
Saudi League. I think he did brilliantly so and you
know the challenge with being a Spurs fan is the
hope that kills you. So you know, I now just
take every day as it comes, and yeah, it's a
(36:35):
beautiful day. It's a beautiful day in London. I'm not
going to get depressed.
Speaker 6 (36:39):
Yeah, thank you so much, Lee for joining us from
our London office. We were thrilled by this conversation, especially
lovely football and tourism tips that you gave us, and
we look forward to when you come to Hong Kong.
We hoped to have a meal with you, or when
maybe Dave Night get the opportunity to go to Saudi
Arabia and maybe watch a football match.
Speaker 4 (37:00):
You will be very very welcome, and we'd be sure
to hit those tourists hotspots and I make sure you
get the right food too.
Speaker 2 (37:07):
Fantastic, and we'll make sure we're more we're there for
more than a day. It looks like it's a ton
of dude not worth squeezing into.
Speaker 4 (37:15):
That sunny read, but sunny react. It is a huge
country with incredible incredible singer.
Speaker 2 (37:22):
Okay, so one of the assignments is we see in
the office here is I'm gonna drag my boss down
from the stairs and then you're gonna convince him to
set me loose, give me a three week call a
day and not charge me for it. Leave fantastic, Thank you,
Thank you, so much for your time. To our listeners,
thank you for listening to Tiger Money, your Bloomberg podcast
about investing funds in financial markets in Asia and beyond.
(37:42):
If you like what you here, please do not forget
to subscribe, to like and to share. Until next time.
You can find us inside the Bloomberg terminal or on LinkedIn,
and we look forward to hearing from all of you.
This podcast was produced by Clara Champ.
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