00:00Giorgio, thank you so much for your time today.
00:02So you have been expanding in these Middle Eastern markets, including Dubai, Bahrain as well.
00:07So can you talk to us about how exposed you are to the current conflict there?
00:13So first of all, thank you, Paul. Thank you for having me.
00:16Well, obviously, this situation is quite unprecedented.
00:20For us, clearly, we have about 60 people in the region,
00:24and obviously the security and the safety is our first priority.
00:29Clearly, there are advisory offices,
00:31so our business is actually booked in Switzerland or eventually in Singapore.
00:36So from a business standpoint, not much to report.
00:39Obviously, from a humanitarian standpoint, it's a very difficult situation.
00:46And from a business standpoint,
00:48what types of conversations are you having with your clients at the moment
00:51about risk appetite and about how and when this conflict ends?
00:57Well, that's clearly a very difficult question to answer.
01:02I think that the markets entered into this crisis at the end of February,
01:06thinking it's going to be like June after a couple of weeks is over.
01:09Now we are already in the third week.
01:11The situation doesn't seem to get to the end soon.
01:16The concern of many clients is that they will stop trading,
01:21they will stop transacting, and we are going to go to a risk-off situation.
01:25So obviously for us, diversification remains key.
01:29In particular, what is very concerning, I would say, is the level of bond markets.
01:37We have seen the treasuries going up and not a flight to quality,
01:41as we have seen in other crises.
01:42So this is a bit very fragile, the overall situation.
01:47Are you finding that cash positions at the moment are larger than they would normally be?
01:52Because obviously the U.S. dollar has been catching a bit,
01:54one of the few havens in all of this.
01:56Are you seeing evidence of that?
01:58And what other evidence are you seeing of investors becoming more defensive?
02:03Yeah, we see investors becoming more defensive,
02:06but I would say that the evidence is not yet going back to cash,
02:10but at the moment is stopping,
02:11is going towards more on the sidelines, risk-off stance.
02:18And this is, for our business, is actually the biggest concern of all.
02:23If clients stop trading and transacting, this becomes an issue for us.
02:29Is this a good time to be chasing dips,
02:32to be buying quality names and blue-chip stocks?
02:36Well, obviously quality is always good,
02:39but at this stage it's very complicated to call
02:42because nobody knows how long this is going to last.
02:45We believe that it shouldn't last too long,
02:48but again, we were saying the same thing two weeks ago,
02:51and we are still here.
02:53So at the moment, as I said,
02:55there is more caution around the market.
02:58I don't see a lot of people chasing dips.
03:02Well, you still have a job to do.
03:04Can you tell us what your clients are looking for
03:07in terms of finding havens
03:09or just putting money to work in the current environment?
03:13At the moment, we see that the clients that are actively trading,
03:18they are trading volatility.
03:20We see a lot of structural products being traded,
03:23and this is how people try to take advantage
03:27of the high volatility at the moment.
03:29Otherwise, it's more tactical, more than strategic.
03:32As I said, everybody is more looking at the situation.
03:36Geopolitics is becoming, I would say, dominating the markets.
03:41We always said that private banking is geopolitical,
03:44risk diversification.
03:45So with people moving, we see flows going into safe havens,
03:50but not really putting money at work at this stage.
03:55Do you feel markets, well, stock markets in particular,
03:58are accurately reflecting risk at the moment?
04:04I think that markets are starting to reflect risks, yes.
04:09I think after three weeks, people are starting to realize
04:12that the situation is probably more concerning
04:14than we thought at the beginning of the month.
04:18So you were mentioning at the start of this conversation
04:21how you have offices in the Middle East,
04:23small teams on the ground in Dubai, Bahrain, elsewhere as well.
04:29Longer term, once this conflict is over,
04:32and it is over, it will end eventually,
04:34how do you see the markets in Gulf states growing post-war?
04:40Well, I believe that if the conflict ends
04:44in the next couple of weeks,
04:46the situation over time will normalize again.
04:48I think that the Middle East is one of the engine of growth,
04:52like Asia, for that matter, in our business
04:56and in the world in general.
04:58So I believe it's a function of how long
05:00this conflict is going to last.
05:03Again, I've been traditionally very bullish for the Middle East.
05:07I think I'm still very positive.
05:09But again, we need to see how long this is going to continue.
05:14And again, at the moment, we have not seen any action,
05:19any hostile action.
05:20Again, the infrastructure, for example,
05:22the salination plants in the Emirates, for example.
05:27And clearly, this will be a key important element to watch.
05:32Well, in the meantime, you know,
05:34this conflict is putting up energy prices globally.
05:37The cost of moving goods around rising as well.
05:41What impact do you see this conflict on having on inflation
05:45and growth in the longer term, particularly in the US?
05:49Well, we see that clearly if the situation persists
05:53and given the damage to some of the infrastructure,
05:56the likelihood that even if the conflict ends in the next couple of weeks,
06:00some of the consequences will continue.
06:03This could create problems for the inflation.
06:06And this is why the bond markets are reacting as they are reacting.
06:11And so, you know, all the forecasts that interest rates will go down,
06:15I think they have been putting on hold.
06:18In some markets close to Home for You, interest rates went up.
06:22This was not particularly expected a few months ago.
06:25So I think that there is a general resetting of the old macroeconomic situation.
06:32And again, the risk of a global recession is clearly increasing.
06:36This is not our base case, but clearly the risk has increased.
06:41Yeah, in terms of Fed policy, we heard some remarks from Jay Powell over the weekend.
06:45He was praising Paul Volcker for raising rates during an oil shock back in the 1970s,
06:51even though it meant a recession.
06:53Do you see a chance of history repeating this year?
06:58I think things have changed very much from the 70s.
07:01Markets are much more interconnected.
07:03I think it will be complicated.
07:08But again, at the moment, we are in an unprecedented territory.
07:12So again, our advice is to reduce exposure in the asset classes that are more risky
07:20and to wait at this stage.
07:22It's very difficult to make great calls.
07:26You know, I would have said that probably the ECB would be the first to raise rates,
07:31but you cannot exclude that this happens also on the other side of the Atlantic.
07:38So when you're looking around global markets and economies,
07:41which do you feel are best positioned to absorb the sorts of shocks that we're seeing at the moment?
07:46And, you know, might I make a suggestion to get you started?
07:49Is China a good example?
07:52Well, we, in general, for our business, but in general for macroeconomic considerations,
07:59we are very positive about Asia.
08:01We have been positive about Asia.
08:02In our business, we serve wealthy clients.
08:05We believe that wealthy clients in this part of the world will continue to thrive,
08:10and entrepreneurial wealth will continue to be created.
08:15So I think that at the moment in Asia, it seems that there is an area of stability
08:20that unfortunately we don't see in other areas.
08:23So overall, this is a good place to be.
08:28Yeah, so you are in Hong Kong at the moment.
08:30Can you talk to us a little bit about your agenda while you're in the region,
08:35where you're looking for opportunities, and what your clients are saying there?
08:41Yeah, I just arrived this morning, so a few hours back.
08:43So we are starting our week in Hong Kong and Singapore.
08:48Clearly, we are going to meet with clients.
08:49We are going to meet with our teams here.
08:52We have about 400 people in the region, and we are going to test the situation.
08:58Again, I think that, as you can see from the screen,
09:03the markets continue to take a very negative stance.
09:06But as we were saying, in relative terms, this part of the world seems more stable.
09:12But coming back to the discussion about Falker in the 70s,
09:16economies are much more interconnected than at the time.
09:19So the situation is very fragile, and you need to handle with care.
09:26I hope that...
09:26How can I end by...
09:29I wanted to say, I hope that everybody will see that.
09:34Yeah, well, I'd like to end by asking you to make a prediction, if I can.
09:38If we were to have another conversation at the end of the month,
09:41how do you think things would look,
09:43and what's the biggest risk that's keeping you awake right now?
09:47Well, as you know, my role is not to predict the future.
09:52Our chief investment officer does that.
09:54My role is to navigate through this difficult environment,
09:58and we have done that over unprecedented crisis over the last five to ten years.
10:03Again, maybe it's more wishful thinking.
10:05I hope that the conflict will end soon,
10:08and then we're going to see the damage that we have had in the economies overall.
10:13So I'm not going to do any prediction.
10:16This is more a wish than a prediction.
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