00:00Earlier this week, State Street announced the launch of your regional headquarters here in Riyadh.
00:04Talk to us about why it made sense for the business.
00:07Well, we've been in Saudi now for over 40 years.
00:11We established a physical presence here back in 2020.
00:15And as we've seen the growth in the region, growth in our client needs here,
00:21the regional headquarters made sense.
00:23We can concentrate people here.
00:25We've also, and we've talked about this publicly,
00:27we've applied for our direct custody license.
00:30So by this time next year, we'll be a local custodian here.
00:34So we'll be able to serve clients, not just in their global activities, but in what they're doing here.
00:39And then finally, as we talked about last year, we opened our investment center here.
00:45So it's our 11th investment center around the world.
00:48So we have the full range of activities here.
00:50Hence, the regional headquarters made sense.
00:52And is client activity in this part of the world different to what you're seeing in other jurisdictions?
00:58I would describe it as changing because for years, people thought of the kingdom as a place to come and get money,
01:07get investments elsewhere.
01:09And the Saudis have been extraordinary global investors.
01:12What's changed is the investment opportunities in the kingdom,
01:16really propelled by Vision 2030 and the success there.
01:20And so what you're seeing in Saudi is both outbound capital and inbound capital.
01:25And that's what you want to see in an investment center.
01:28I mean, people always talk about trade flows, but capital flows are just as important.
01:32And you're seeing that here in the kingdom.
01:33And how would you look to take advantage of that via your own business?
01:37Well, if you think about what State Street does, we do two things.
01:40We invest money on behalf of clients and we service the investment activities of institutional clients.
01:46And so we've got opportunities in both areas.
01:50And our clients have needs in both areas.
01:52There's a lot of interest, for example, in investing in Saudi.
01:55But if you're a small or medium-sized investor outside of Saudi, how do you do that?
02:01Hence, the Saudi ETFs that we've launched.
02:04For those that are looking to come here or for Saudi investors here looking to broaden their investment activities,
02:10we provide a range of investment services.
02:12And do you see that liquidity has improved as Saudi Arabia and the rest of the region focus on improving and expanding the scope of their capital markets?
02:21It's absolutely improved.
02:23And the regulators and the policymakers are doing a great job.
02:27The big task in front of them now, which they're all working on, is fully establishing the debt capital market.
02:33And you're seeing lots of progress there.
02:36And that will be important.
02:37And it's not that Saudi lacks money, but what you want to have is you want to have capital flow and you want to have velocity of capital.
02:45So by the establishment of the debt capital market, by the establishment and broadening of the equity market, you're going to see that.
02:51And the signs are already there that that's going to be successful.
02:55And we want to be part of that.
02:56And more importantly, we want to support that and enable that.
02:59Well, if I look back more broadly at the year, it's been a year of immense news headlines, a lot of market volatility.
03:07You look at where markets are today and you have stock markets at all-time high credits at the lows, but it's been a bumpy ride to get there.
03:13How has that translated into transaction volumes for you?
03:17So where it's, well, transaction volumes have been high and we've had a great year.
03:21We just reported our third quarter results.
03:24But if you think about it in terms of capital flows, about this time last year, there was a very high overweight.
03:31If you looked at where investors were invested around the world, a very high overweight to the U.S.
03:37That overweight started to come down around the election time and then actually started to come down further at the beginning of the year.
03:46It probably reached its floor in the second quarter with a lot of the uncertainty around tariffs and where was that going to play out.
03:55Interestingly, you've seen some of that overweight return.
03:59Are you talking about equities here?
04:01Equities?
04:02Because it's not the U.S.
04:02No, I'm talking about overweight to the U.S.
04:05Okay.
04:06And I mean, certainly you've seen a decline in the value of the U.S. dollar, but that was also from a near all-time high.
04:14So what you're seeing is, I think, some concern and uncertainty about where to invest, but a little bit of a return.
04:22I think what would be healthy is to see a broadening of the market.
04:26I mean, it's all great for lots of investors to be piling into the U.S., but there's great value outside the U.S. too.
04:33You're seeing a little bit of that.
04:35But when you look around the world, most investors are saying that there's a few countries that we want to invest in.
04:41Saudi and the greater GCC is one.
04:44And the U.S. remains quite strong.
04:46Yeah.
04:46Interesting.
04:47So given we've spoken about, we touched on the weakness of the USD, have you seen a significant amount of interest to buy non-USD assets,
04:56whether they're other currencies, whether it's gold, obviously, being very topical, cryptocurrencies as well.
05:03Do the flows back that up?
05:05The flows do back that up.
05:06And again, when you have a time of uncertainty and there's concern about things like the strength of a particular currency, be it dollar or any other,
05:16you do see flows into gold.
05:18And again, we saw a lot of uncertainty this year, but what seems to be happening is people may not like a particular direction,
05:30but when they have certainty around it, it's much better to be facing something you don't like than to be facing something certain.
05:36And it seems like tariffs and how they're playing out are starting to become more certain.
05:40So from what I've read, State Streets seem to be exploring digital assets custody.
05:45Can you talk us through where you are in that journey and what upside you see from that business?
05:51So again, we go where our clients go, whether that's geographically or the type of assets that they want to invest in.
05:57We'll either support them in that.
06:00And if you think about the fact we're such a large investment servicer, when our clients want to invest in a particular asset class,
06:07we've got to be able to support them.
06:09So we already do digital fund accounting and digital record keeping.
06:13Digital custody is something that we need, the regulators need to get together on this.
06:19But you saw what happened in the U.S. and again, in geographies like here in the GCC,
06:25there's a regulatory enablement of this about to happen.
06:28So we're building up the digital custody abilities.
06:32And the question that I think everybody will be asking you is, how is AI impacting your business?
06:40So if you think about AI, all the attention has been paid on really building the infrastructure.
06:46The real value added, the real value added will be when applications start coming in.
06:51And I think we're all working on that.
06:54Much of what we do is operational in nature.
06:56And if you think about an operation, whether it's a reconciliation or a settlement of a security
07:01or the movement of money and securities around, you want to do that rapidly, you want to do that error-free,
07:07and you want to do that at low cost.
07:09And AI supports all that.
07:11So what we will see is improved client experience, whether it's speed or cost, improved employee experience.
07:19If you're an employee, any one of us, there's certain parts of our day that we'd like to dispose of
07:26and do other kinds of things that will free up employees to do other things.
07:30But then risk management and decision-making support.
07:33So the surface is just being scratched here, and I think we're going to see lots of it,
07:39particularly in a business like ours, which is so operationally intensive.
07:42So, we'll just put all these attributes that you want to do in danger in front of us.
07:49So we're going to see that.
07:51And again, the creative treatment führt, even though in the same way of hold our company,
07:54it's because as an atmosphere we're really grateful to be that.
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