Return to Transcripts main page
Quest Means Business
Top Names In Global Economy Highlight Geopolitical Risk; SUNAK Warns Of Difficult Decisions Ahead To Fix Economy; U.S. Stocks Higher For Third Straight Day; Former Barclays CEO "Already In A Recession"; Chinese Yuan At Lowest Since 2007; Standard Chartered CEO Says "Always Will Be Black Swan Events"; Saudi Ambassador On Ukraine War, Oil. Aired 3-4p ET
Aired October 25, 2022 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, CNN INTERNATIONAL HOST: It is 10 o'clock at night in Riyadh, in Saudi Arabia, a day of serious talk about the Future Investment
Initiative FII, which is why we are here.
The markets and how they have been trading at the start of a new week. And look, and you'll see, we are up from the Dow strongly. It's bullish, it's
been up all day, and it seems to be staying there, at least the triple stack suggests also a strong reaction for the market for the day.
The markets as they are and the main events of the day: The world's top bankers tell me what keeps them up at night, as recession is on the cards.
It's not the economy, it is geopolitics.
In London, in the UK, Rishi Sunak's warning of difficult decisions to fix the UK's wounded economy.
And the chief executive of Standard Chartered on the most at risk in this crisis.
Live from Riyadh, in Saudi Arabia. It's Tuesday it's October the 25th. I'm Richard Quest. And yes, in Riyadh, I mean business.
You don't need to be a rocket scientist or a Nobel Prize winner in economics to know the global economy is in a terrible mess. Geopolitical
risk has rarely been higher. In the UK, for instance, political instability has brought about the third Prime Minister in seven weeks.
In Ukraine, there is alarm over Russia's escalating disinformation campaign. In the United States, inflation is rapidly becoming the dominant
issue in upcoming elections as the Fed raises rates.
And so corporate leaders have gathered here in Saudi Arabia to discuss how to weather the storm. We are in Riyadh. We are bringing you QUEST MEANS
BUSINESS from the Saudi Future Investment Initiative -- FII to its friends, the nickname, "Davos in the Desert."
Some of the biggest names in finance join me on today's panel.
You're going to hear from Jamie Dimon, Chief Executive of JPMorgan; Ray Dalio, the founder of the world's biggest hedge fund; Goldman's David
Solomon; Catherine MacGregor, CEO of Engie, one of the biggest utilities in France, and Yasir Al-Rumayyan, the Governor of the Saudi PIF, the Public
Many of them said a recession is not their biggest concern.
(BEGIN VIDEO CLIP)
JAMIE DIMON, CEO, JPMORGAN CHASE: It's very good news right now, in the United States, people see it -- consumers businesses, still spending, still
lots of money, a lot of fiscal stimulus. But there's a lot of stuff on the horizon, which is bad and could, it doesn't necessarily be -- but could put
the United States in a recession. That's not the most important thing of what we think about. We'll manage right through that. I would worry much
more about the geopolitics of the world today.
QUEST: You worried about geopolitics, what side of the geopolitics, particularly?
DIMON: I think the most important thing is the geopolitics that is going in Russia-Ukraine, America-China, the relationships of the Western world
and that would have me far more concerned than whether it's a mild or slightly severe recession.
QUEST: If you look at the current difficulties that we're facing, and particularly financial difficulties that are likely to last several years
as we unwind the decade of cheap money and so forth, is it difficult to convince publics -- populations that we are on the right track when they
see such lurches?
I mean, let's take US interest rates, which are going to go to the -- there is an entire generation of population that's never seen that level of
interest rate before.
Now, people around this table have seen much higher.
DAVID SOLOMON, CEO, GOLDMAN SACHS: I don't think, Richard, we're unwinding 10 years. I think we're unwinding 40 years. I think candidly, we
privatized fixed income -- we -- I'm sorry, we nationalized fixed income markets around the world for a variety of reasons. Central Banks
nationalized fixed income markets, and we're now going through a process of privatizing them again, and that's disruptive.
I mean, as Jamie said, if we have a significant recession in the US or elsewhere in the world, we will work through that, but as we work through
and we think about where we are, different kinds of decisions will have to be made to get different results when you look five to 10 years forward.
And that's something that takes time. There aren't easy answers. There is not a silver bullet, it's time to work through and it takes adjustment. And
candidly, we're going through an adjustment after a very long period of time of the world, at least from a macro or a monetary policy perspective
work in a certain way.
QUEST: On that point, Governor, the issue of working through will be painful. And populations, citizens will become disillusioned. And not
surprisingly, there is a large number of people who say the system did not work for me. Therefore, we either go extreme or we check out. That's a
H.E. YASIR AL-RUMAYYAN, GOVERNOR, SAUDI PUBLIC INVESTMENT FUND: I mean, checking out is not the solution. Extreme is not a solution, too.
QUEST: But they are risks. Globalization and the geoeconomics is happening now, because of weaponizing some of the things that we shouldn't
What happened between many countries by banning certain products and services and these kinds of things, instead of the expansion on the
economies that we have witnessed in the past two decades. Now, we are going backwards, instead of moving forward. Every country now has to have its
full supply chain.
CATHERINE MACGREGOR, CEO, ENGIE: Just maybe a comment on the availability of making investment decisions these days, and you know, we always say for
investment decision, you need stability, you need fiscal stability, you need regulatory fiscality.
And what is happening post this war is that market designed questions, many people and governments are talking about and actually implementing and
doing market intervention measures, they are disrupting quite a bit the fiscal stability of the system, which really poses some interesting
challenges for us, as individual investors, particularly on the energy side.
So, I think it's going to be very important that we try to overcome the current short-term hurdles and start to anticipate how this will all settle
down so we can have more visibility and more stability on market designs, fiscal regime, so we can go back to doing our business.
QUEST: Let's take the UK, hardly stable.
RAY DALIO, FOUNDER, BRIDGEWATER ASSOCIATES: I think, I think you have to understand the mechanics, the cause-effect. It's a very basic thing. When
you produce a larger deficit, you have to sell your bonds, you have to know who the buyers of the bonds are. If you don't have enough buyers of the
bonds, you're going to have a buyers strike. So you're going -- they're going to selloff, and this is I think, what's happening -- what's happened
in the UK is a canary in the coal mine, that if you take what's happening in Europe as a whole.
The level of interest rates relative to the level of the inflation rates, and the terrible choice that has to be made about if you raise interest
rates, what does that mean to Italy's debt service payments? Who is going to make up that difference? There's just mechanics to this.
So I think that there is -- we are in a situation generally, where there's not coordination.
QUEST: Clearly what you're all talking about, and you've been quite open about is geopolitical risk and geostrategic issues. For you, Jamie, which
is the most significant in the world at the moment.
DIMON: It is Russia-Ukraine, and the effect it has on the relationship of America and China. I think, take a step back here, the world and mankind
and Ray mentioned this, begin better and better century after century after century in terms of life, people not living in poverty, people --
childbirth, you know, not dying in childbirth, et cetera, and that trend isn't stopping yet.
I think February 24th was a massive pivot change in the world. It kind of woke us up to this illusion that the kind of Western world had that somehow
pieces at hand and you don't really worry about it, that was a mistake.
And around that immediately is, you know, national security is energy security, is food security. It is perfectly reasonable that a country says,
"How can I protect myself by diversifying my supply chains et cetera?"
But at the root of all this, in my view is American leadership. If you don't have strong American leadership and not ugly American leadership, not
our way or the highway, but just as a coalescing thing for the Western world, you're going to have chaos like Russia and Ukraine.
And there's nuclear blackmail is probably the worst thing that we've seen in our lifetimes. And it's also teaching the rest of the world, it is okay.
So if we're not sitting here in a couple hundred years, there will be nuclear proliferation. It's not going to be climate change.
(END VIDEO CLIP)
QUEST: That is Jamie Dimon. There was a large panel of the great and the good.
Hani Kablawi is with me, the Chairman of BNY Mellon International.
Good to see you, sir.
HANI KABLAWI, CHAIRMAN, BNY MELLON INTERNATIONAL: Thank you very much, Richard.
QUEST: Thank you, sir, for coming in.
The situation globally, we just heard there. Everybody is expecting rates to go up further. Recession has now become the accepted norm. Would you
agree with that?
KABLAWI: I think that we possibly enter into a recession sometime early to mid-next year. That is possible. The big question is, how quickly can we
get out of it? Is it a V, U, W -- those letters again, I would say.
I mean, look, our narrative, high level is that there are probably three things playing out globally that we need to watch out for.
One is that deglobalization is taking pace.
KABLAWI: That is going to result in disruption and shortening of supply chains and result in inflation structurally.
QUEST: Which we've got.
KABLAWI: Which we have. There is an end of the peace dividend of 1989. That means energy prices are likely to stay up for longer, and there is
just generally, an end to quantitative easing, that as Central Banks are trying to suck liquidity out of the market and control inflation.
QUEST: How does that affect this part of the world? Because at the end of the day, Saudi, all the Gulf states have really benefited from the higher
oil price, and will continue to do so.
KABLAWI: That is exactly right. So on balance, all of these -- at all of that narrative actually plays out in favor of oil producing and exporting
And in fact, inflation hasn't been that high here as it has been in other markets. They have had to match interest rate rises, because of the dollar
pegs. But actually, it's been a pretty benign environment otherwise, and energy prices have been a boon.
QUEST: Can Saudi continue this spending boom. I mean, Neom, the Giga Projects --
KABLAWI: Red Sea.
QUEST: The Red Sea Project -- all of these different --
KABLAWI: Roshn. They are building 500,000 housing units around the country. Diriyah, a lot of the tourism projects that they are building.
There is a lot of spending taking place. It is very organized. And so one of the themes that I walk away with from the FII this year, is that the
momentum seems to be palpable. You can feel the energy.
You talk to any Saudi, we employ Saudis here in the Kingdom, and everybody is on message, everybody is on the bus and there seems to be strong
momentum towards Vision 2030 with strong execution.
The question is, will the funding be here for all of these programs in the medium to long term? And of course, part of the answer here is that as they
deliver phases, they are going to be showcasing these phases and expecting more FTI and portfolio flows to come.
QUEST: I see that's a difference, because to a large extent, previous infrastructure or whatever has been funded domestically through revenues.
If you're now saying and we know PIF, for example, did go to the market on a bond issuance, and therefore we got greater transparency of PIF's books.
The money is no longer just flowing one way, they are going to be looking to bring it in.
KABLAWI: There is a lot more transparency and investment and financial market infrastructure taking place here to do exactly that. Right?
So you're delivering on phases of these Giga Projects, but you're also investing in the financial sustainability of a lot of your companies here.
The National Development Fund is another example of a large funds that is taking a development approach, similar to what we see in other markets,
QUEST: The changes that MBS has introduced, have certainly dramatically altered the way of life.
QUEST: But is it still easier or easy to convince staff to come and transfer to Saudi Arabia?
KABLAWI: I think we are transferring some people to Saudi Arabia, and we know a lot of our peers in the industry are transferring people to Saudi
Arabia. It costs a little bit more to do that, perhaps. But I think that expertise also can be transferred over time.
So we're transferring knowledge both by moving people here, but also by training developing and spending a lot of time with our Saudi clients and
QUEST: It is good to have you with us, sir.
KABLAWI: Thank you very much. Good to be here.
QUEST: Thank you very much, indeed. Thank you. I am grateful.
Day one for Britain -- the UK's third Prime Minister this year. Now, it is Rishi Sunak, and he is promising responsible government to deal with what
he calls a profound economic crisis. Strong language on his first day.
QUEST MEANS BUSINESS.
QUEST: Rishi Sunak made key Cabinet appointments, just as he was arriving at Downing Street, his first day as the Prime Minister.
The first and perhaps the most important and symbolic was to keep Jeremy Hunt in place as Chancellor. Hunt had calmed the markets earlier this month
by renouncing the fiscal plan put forward by Liz Truss.
Suella Braverman has made a remarkable comeback. She is the Home Secretary. Now just remember, of course, she resigned last week for breaching
government rules. Now, she is back.
In his first speech as Prime Minister, Sunak promised responsibility at a time of profound economic crisis.
(BEGIN VIDEO CLIP)
RISHI SUNAK, BRITISH PRIME MINISTER: I will place economic stability and confidence at the heart of this government's agenda. This will mean
difficult decisions to come.
(END VIDEO CLIP)
QUEST: Now, Scott McLean is in Downing Street this evening.
So, we've got the new Prime Minister, we know he is sort of a safe-ish pair of hands. I guess the question becomes the confidence level of his new
SCOTT MCLEAN, CNN CORRESPONDENT: What I have found absolutely fascinating, thus far, Richard is the fact that Rishi Sunak has kept on so
many Ministers who served under Liz Truss. By my count so far, it is roughly about half of the appointees thus far served in the Truss
government. Some of them have been shuffled around to different posts and some changes around the edges.
But Rishi Sunak said that he wanted to have a unity government, that he wanted to unite the various factions of his party -- the Truss supporters,
the Boris Johnson supporters, and of course his own more moderate wing of the party as well.
Of course, he has managed to reward some loyal backers, people like Oliver Dowden who ran his campaign, people like Michael Gove, people like Dominic
Raab, and of course, Jeremy Hunt as well who is an early backer of Rishi Sunak after he abandoned his own leadership bid over the summer.
But it is remarkable to see just how many people from Liz Truss' government, from the more right-wing part of the Conservative Party have
been brought in to serve.
QUEST: Scott, is there a feeling there, that the ship if not exactly fully stable, it least is better. You know, things are coming together with
an air of normality, if you will, the moment of madness is over.
MCLEAN: It sure seems that way. I mean, it seems like even before Rishi Sunak officially took office, just his mere presence in Number 10 seemed to
sort of calm the country, calmed the markets, certainly as well. The pound seemed to stabilize because by and large, the markets and the British
people know what they're getting with Rishi Sunak because he was the architect of so many of the huge, huge spending decisions that happened
during the pandemic, unprecedented spending in order to keep people's jobs afloat, in order to keep the government afloat during the pandemic.
And Rishi Sunak of all people was perhaps the most aware of just how much money there was to pay back, and so, he had already started to lay the
plans for tax rises to actually tried to pay for this massive bit of spending and he didn't try to hide that fact. And perhaps that also
hampered his bid for the leadership over the summer.
Clearly, his party has come to the realization now, at least the elected MPs have now come to the realization now that many of Liz Truss' campaign
promises over the summer, while they turned out exactly how Rishi Sunak predicted they would turn out, which would be disastrous, and especially
So now Rishi Sunak is going to have to go back, look at the books once again and try to figure out where exactly he can trim. Obviously, Jeremy
Hunt, the Chancellor, the Finance Minister has started to do that as well.
What will be interesting to see though is how many changes or whether or not we find out how many changes Rishi Sunak perhaps proposes to Jeremy
Hunt given that he knows this country's finances so well.
QUEST: That is Scott McLean, who is in Downing Street. The interesting part -- thank you, Scott.
The interesting thing Rishi Sunak, of course, was elected on the back of the mistakes of his predecessor. The markets gave their strong reaction.
Lord Adair Turner is the Chair of the Energy Transition Commission, well and truly knows Westminster and Whitehall backwards, and he told me the
market's reaction to the Liz Truss mistakes came as no surprise to him.
ADAIR TURNER, CHAIR, ENERGY TRANSITION COMMISSION: I thought it was a ludicrous budget and the market correctly said, you've got all these tax
cuts, absolutely massive tax cuts, you've not specified how you'll match that with a spending reduction. And indeed, I think those spending
reductions would be politically impossible and undesirable, so you're going to have to borrow a huge ton of money.
If you want to borrow a huge ton of money, we're going to charge you a lot for it. That was absolutely predictable, predicted by Rishi Sunak over the
summer, and it was a deeply irresponsible budget to have introduced.
QUEST: Right. So, now we have Prime Minister Sunak. He has been invited by the King and he has taken the job. What's his priority?
TURNER: Well, I'm sure his priority is to navigate through the current economic environment, the high energy prices, the high inflation. He is
only got a certain number of degrees of freedom, and some of the heavy lifting of the return to sanity has already been done by Jeremy Hunt last
QUEST: In Downing Street, just a few moments ago, he talked about the UK facing a profound economic crisis. There is a sense of reality in that
sentence that we haven't heard before.
TURNER: No, there is a sense of reality. There's some danger of almost overstating it. I mean, I think we will probably have very slow growth next
year, we'll have high inflation.
On the other hand, let's be clear that inflation will fall out pretty quickly and the way that it came in, because when you have very large
increases in energy prices, as long as they don't go up again, it falls out a year later. So I think we are in very, very tricky times.
What I hope, however, is that over the next two years, we also have a focus -- by which I mean, running up to the next election. We also have a focus
on debating some of the long-term issues about how the UK has a more investment driven economy and how we achieve a green transition.
QUEST: Several people have commented, this is all very good, but the reality is, hydrocarbons are going to be arguably the dominant power supply
fuel for the foreseeable future.
TURNER: No, not power supply. If you mean electricity. I mean, the UK by 2035, I think on the plans that we have and a deliverable, we will be only
getting 10 or 15 percent of its electricity from fossil fuels, from gas. It will be a system which by then will be 60 percent or so renewables and 15
or 20 percent nuclear.
We know how to decarbonize electricity. Some of the other sectors like industry are more tricky. But if you ask me about electricity, I think the
developed world is heading to almost entirely renewable and nuclear electricity systems faster than we thought, even five years ago.
QUEST: Take out power and put in transportation in the industry --
TURNER: Passenger EVs will happen faster than you think. Steel will decarbonize faster than you think. The development of green hydrogen.
Around the world, we spend a lot of time talking at my Commission with the steel industry. The interest in green hydrogen is far bigger than it was
So look, I think there is a whole -- and let's take sustainable aviation fuel. I think the plans for developing sustainable aviation fuel instead of
conventional jet fuel are massively more advanced than they were two or three years ago.
So look, we are not on target to limit global warming to 1.5 degrees, but sector by sector, actually, there is quite a lot of good stuff happening
and if anything accelerated over the last six months.
QUEST: Back to the UK, the LDIs. Now, you know a bit about pensions. Nobody could have foreseen this was going to happen. Well, I mean, I
suppose, a theoretical, you could foresee it. But doesn't that just tell us that there is always going to be some financial instrument somewhere that
could be a ticking time bomb?
TURNER: Yes. I mean, the LDIs -- Highly Leveraged Instruments, which involve a form of derivative, which will be a good hedge most of the time,
and in extreme circumstances, it will be a lousy hedge, or it will create very large collateral calls.
Those always create instability. They always look there within the financial system. Here is the good news though: After 2008, we put in place
in the poor bits of the banking system, which is ultimately the commercial banks, much higher capital requirements and much higher liquidity, so I'm
going to stick my neck out. We are not going to see a systemic financial crisis, anything like we saw in autumn 2008.
QUEST: Gosh, Lord Turner -- Lord Adair Turner, telling us how it really is.
It is QUEST MEANS BUSINESS tonight. We are in Saudi Arabia. We're in Riyadh.
In a moment, I ask Goldman Sachs Chief Executive, David Solomon about the path ahead for Central Banks. He says they could tighten policies even
QUEST: Strong day on the markets, U.S. markets are heading for the third straight day of gains. The Dow, look at the Dow, it is up 300 points. They
have been all day and they are sticking.
In fact, we might even have to squint at the screen for the rest of the day. Similarly, excuse me, the Nasdaq is at a near session high. Meta,
Apple, Amazon, all reporting earnings this week of what we've seen so far. It is encouraging.
The Dow has risen over the past three weeks, as investors expect the Fed to slow the pace of rate rising, I should say. As for the pound, we talked
about Rishi Sunak. It is now back to levels that have not been seen since Liz Truss became prime minister, so 1.14, if you are trading, that's the
The CEO and chairman of Goldman Sachs, David Solomon, told me that there will likely be a recession in the U.S. and Europe. During our discussion,
he described what he expects to see from the Fed in the months ahead.
(BEGIN VIDEO CLIP)
DAVID SOLOMON, CEO, GOLDMAN SACHS: There is no question that economic conditions, in my opinion, economic conditions are going to tighten
meaningfully for the year.
I think in the United States, particularly in the last week or two, there has been a clear message from the Fed that they're going to get to the
current path target of 4.5, 4.75 and that pause because of the lag effect on all of this.
But if they don't see real changes, labor is still very, very tight. They are obviously just playing with the demand side by tightening but if they
don't see real changes in behavior, my guess is they will go further.
And I think generally when you find yourself in an economic scenario like this, where inflation is embedded, it is very hard to get out of it without
a real economic slowdown. So, I too am in the camp that we likely have a recession in the U.S. going to happen and I think most likely a recession -
- there might be a recession in Europe.
And so until you get to that point that you see a change, whether it's in labor, the demand side, you are going to see central banks continue to move
on a trajectory.
JAMIE DIMON, CEO, JPMORGAN CHASE: I agree.
QUEST: Thank you, I'm going for coffee.
You agree, where do you think we are in the process?
DIMON: Six months away.
(END VIDEO CLIP)
QUEST: Six months, there you have it. The former chief executive of Barclays says the U.S. is likely already in a recession. I spoke to Bob
Diamond earlier. He's now the head of Atlas Merchant Capital.
He told me, despite the recession risks, he again, like others, expect central bankers to keep tightening policy.
BOB DIAMOND, FOUNDING PARTNER AND CEO, ATLAS MERCHANT CAPITAL: If we use the U.S. as a benchmark, I think there is going to be two more raises this
year. I think we will end this year at around 4.5, give or take 25 basis points.
I think we are beginning to see a turnover in some of the economic numbers. In my own view is, at the end of this year, we will see the Fed stop,
pause, take a look at the impact of what they have done. I think, at that point, funds will be around 4.5 percent.
QUEST: We have gone from 0 percent to 4.5 percent in less than a year. That is remarkable.
DIAMOND: It is remarkable but it was really, really necessary, Richard. As recently as the beginning of March, the Fed was still buying security,
still doing quantitative easing. They clearly waited too long. Now people are worried because of the rhetoric.
I think the Fed rhetoric has almost become a policy tool. And I do believe that if they err, they're going to err on the side of staying a little bit
too long in terms of raising rates.
QUEST: So just on the sheer mathematics, it'll be April, May next year, for the full whack of all of this to be in place.
DIAMOND: I think by the end of this year it is possible. We have seen the --
QUEST: The recession next year?
DIAMOND: Well, I think we are in a recession.
I'm not sure of that. I mean, recession technically is negative growth. I think we need negative growth. We need a mild negative growth, a mild
recession for a few quarters just to slow down inflation.
QUEST: So the U.K., what a mess, what an absolute mess. But this means prime minister Rishi Sunak's and Jeremy Hunt's wiggle room is almost
nonexistent now because the market is so unhappy.
DIAMOND: There is a little bit of cometh the moment, cometh the man. And I think Rishi was the right one. His wiggle room right now, Richard, I think
is real actually. It is not on the fiscal or monetary side, that is clear.
But the U.K. is over regulated in so many sectors of the economy. If he makes it easier to do business, easier for the private sector in the U.K.,
particularly with the trade challenges from Brexit and the other challenges from monetary and fiscal policies, that is where his wiggle room. Is
QUEST: Right but that deregulation doesn't kick in for a year or two.
DIAMOND: Oh, I think you will feel it pretty quickly. I think the attitude in the U.K., post Brexit, trade is more difficult than down. The private
sector really wants to see it easier to do business.
But the immediate impact, absolutely. The Bank of England is going to continue raising rates and Rishi has to be really, really tough on
spending. And that means more taxes.
QUEST: I've got a 20-dollar bill.
Do we put it in equities, do we put it in credit?
Do we put it in a bond?
Or do we go and buy an ice cream?
DIAMOND: You would put it in the Atlas Merchant Capital credit fund.
QUEST: And with the profits?
DIAMOND: We may have an ice cream.
QUEST: We may have an ice cream. Of course, nothing we say on this program should ever induce or encourage you to invest one way or the other, other
than whatever you are up to, I hope it's profitable.
The only way out of an impending recession, might be straight through it. At least, that is what the CEO of Standard Chartered says. After the break,
the world's economic uncertainty.
(BEGIN VIDEO CLIP)
BILL WINTERS, CEO, STANDARD CHARTERED: Even if we have an uptick from here because of the recession, we will be fine. I think the global economy will
be fine. We just have to let that rat pass through the snake.
(END VIDEO CLIP)
QUEST: Very busy day. China's yuan has hit its lowest level since 2007. Xi Jinping tightens his grip on power in his third term in office. The yuan is
down more than 15 percent this year on the dollar. And Xi Jinping's third term is not likely to bring a reversal of China's zero COVID policies.
That is sending investors running as the country's economic forecast gets gloomier. Many stocks traded in New York are down. The dollar index,
however, if you are investing the other way, the dollar index is up more than 18 percent so far this year.
The chief executive of Standard Chartered says a strong dollar makes emerging markets even more vulnerable if and when a recession arrives. I
talked to him about that and the biggest challenges his bank faces.
(BEGIN VIDEO CLIP)
WINTERS: You know, the biggest impact on us over the past year or so has been the lockdown in Hong Kong and the fact that equity markets have been
so poor, which has affected our business with (INAUDIBLE) investors, with wealthy individuals.
So of course, that's down. But other things are up. The tough quarter trade that we are doing, our risk management, the financial market, if we report
our earnings tomorrow, so I can't give any inside scoop.
But we had a very good first half of the year. Third quarter has been consistent in terms of the economic activity and trade activity. But
broadly, we are in super good shape.
QUEST: Then you get the recession that is coming in the developed world.
Well, come on, it is going to happen.
WINTERS: It could be.
QUEST: How is that going to influence?
WINTERS: It doesn't help at all. Keep in mind, where we are anchored, in Africa and Asia and the Middle East, we are not going to have a recession.
QUEST: There will be a spillover.
WINTERS: The whole system is going to come down, for sure. It is going to come down. Thankfully, we're starting here with a really strong capital
position, lots of cash in the bank, very clean loan portfolio. We have very small credit losses.
Even if we have an uptick from here because of a recession, we will be fine. In fact, I think the global economy will be fine. We just have to let
that rat pass through the snake.
QUEST: You are sounding slightly sanguine.
WINTERS: I think we are all prepared for bad times in the next year or two. I don't want to minimize that. Bad times are very bad for the most
vulnerable people. So if you are an emerging markets country that has external debt problem or a trade imbalance, life is very tough right now.
As we've seen in places like Sri Lanka, these are a lot of the markets where we operate.
QUEST: How can you help in those places?
Because the IMF and World Bank, essentially they're saying we learn from the pandemic, that the developed world doesn't (INAUDIBLE). It is every man
and woman for themselves in the lifeboats.
So with Sri Lanka and the emerging markets, at higher interest rates, it is going to get worse.
WINTERS: It's going to get worse and the strong dollar. The strong dollar is very, very impactful for these countries. I will say the obvious, which
is the best cure is prevention. So the earlier we can get in and help these countries to get things in balance, the better.
But as we sit here right now, it is probably too late to prevent. So we have to come up with some different cures.
QUEST: What are the unusual aspects of the U.K. financial debacle in the last month?
And there have been many.
One of the ones I'm sure people like you are looking at is how the LGIs (ph) from the pension funds, these rather tedious instruments that have
been around for decades, never thought of as being genuine hedges, suddenly appear to be ticking time bombs.
What does that tell us?
WINTERS: Yes, it tells us that tell risks manifest themselves all the time. And look, I would venture to say every pension fund tested their
Do we have access to cash if a certain thing happens?
Nobody has tested for a full percentage point increase in long term gilt yields overnight. I don't think anybody thought that was a realistic
possibility. Now we know it is. So the system will recalibrate, just as it did after the financial crisis.
You get used to these black swan events, as they are called.
QUEST: Does this mean there could be other instruments buried elsewhere that are ticking.
WINTERS: Of course. And the idea that we are done with the black swans, forget it. There will always be black swans. It probably calls for being
better capitalized, generally; having more cash in the bank, liquidity in technical terms, generally. And if you get those things sorted out, then
you can absorb the black swans.
QUEST: Finally, the one thing that everyone says the banking system is (INAUDIBLE) may say complain about too high capital requirements and Basel
3 may all have been a real pain for the rest of you in terms of the amount.
But having just seen the Bank of England, I cannot be happier with you all lending a little bit less (INAUDIBLE).
WINTERS: Well, we are landing a fraction of what we lent in 2008.
So we are much, much stronger than we were then.
But there is a really interesting question, which is, at what point should the banking system accommodate every risk that could hit us?
At what point you say, actually, the central bank could should step in at some point?
Think about some of the horrific acts of war or acts of nature, should banks be capitalized to protect against the worst possible scenario?
If we are, the economy will grind to a halt. So central banks, who manufacture liquidity pretty much for free, and that is what the Bank of
England did in this LDI crisis. I think that is a perfect example of where you draw the line and say, up to a point, the private sector has to take
care o itself.
And on that point, the central bank can actually smooth things through.
QUEST: On that point, will be a movable feast (ph).
WINTERS: If you knew what it was in advance, you would protect against it in advance.
QUEST: Bill Withers (sic) of Standard Chartered, delightful to have him on the program tonight.
The energy crisis has pitted the U.S. and Saudi Arabia against each other. The tensions are real but the frayed relations haven't stopped the biggest
business leaders in America from visiting Riyadh this week. Someone didn't come but a lot did.
The Saudi ambassador to the U.S. tells us what comes next in a moment.
QUEST: Despite the fears, tensions between the U.S. and Saudi Arabia haven't held some of the top Wall Street leaders back from coming to Riyadh
and attending the FII. The relationship has been strained by the recent OPEC+ decision to cut oil production, which enraged the Biden
My colleague, Becky Anderson, saw Saudi Arabia's ambassador to the U.S. about the resulting rift.
REEMA BINT BANDAR AL SAUD, AMBASSADOR OF SAUDI ARABIA TO THE UNITED STATES: It is a clear but a point of disagreement. And obviously, that comes from
the decision of OPEC+ to cut the production of oil.
And I would have to just remind people that it was a decision made by 22 countries based on an economic survey that understood that there is going
to be a downturn. And many people have tried to politicize this.
But you are hearing it from the horse's mouth. This is not political, this is purely economic based on the expertise of 40 or 50 years of mapping and
trends. We do not engage in the politics of anyone.
We engage simply as a balancer and a stabilizer of the economy through the energy market, as we've done historically.
BECKY ANDERSON, CNN HOST: Let me provide as a counter argument, the White House perspective. The White House has accused Saudi Arabia of siding with
Is the kingdom siding with Russia?
BANDAR: The kingdom has a policy of engaging across the board those that we agree and those we don't agree. With the relationship that we had with
Russia is what allowed us to free prisoners of war, two Americans, five Brit, one Croat and a selection from other countries.
We view our role as a mediator and a communicator. We've supported Ukraine humanitarianly. We've given them $400 million. We collaborated with Ukraine
and Poland to give $10 million for the refugees coming out of Ukraine's billion to Poland a safe landing. That is what we do. That is the value of
Is it siding with Russia?
No. We voted with the United Nations twice to condemn the annexation and condemning the incursion. We absolutely view the decision by OPEC as
nonpolitical and, if you look at the markets, Becky, what happened?
They are stable.
QUEST: The Saudi ambassador to the U.S.
The tensions, they are not stopping (INAUDIBLE) from continuing to invest in Saudi. It is a $4 billion dollar Mall of Saudi. It's due to open in
Riyadh by 2026. The Mall of the Emirates is already there are, of course, in the UAE.
Since it started in 1995, the Dubai based company has been behind many of the Gulf's most famous malls and attractions. The projects include Dubai's
Mall of the Emirates, the indoor ski resort, 28 other shopping malls throughout the Middle East and Africa.
They have weathered storms front and center, the 2008 financial crisis even as Dubai almost defaulted. And the lessons they'll need to remember as
another recession looms.
Alain Bejjani is the CEO of Majid Al Futtaim.
When I see what you own, first of all, thank you for joining us.
QUEST: When I see what you own, I always feel sort of a little bit sympathetic, bearing in mind a recession is on its way.
Malls, entertainment parks.
ALAIN BEJJANI, CEO, MAJID AL FUTTAIM: It is an interesting region in every sense of the term. But it's not important. I think Majid al Futtaim is a
great example of local businesses that can go local by basically focusing on our key markets with presence across the region.
And we have been able actually to weather the storm, have an understanding of risks and how to manage it.
QUEST: When you say across the region, how do you break down between Middle East, Africa and so forth?
BEJJANI: So we are present in the Gulf and then we drew around the Gulf in the Middle East, in central Asia, as well as in east Africa and in some of
Asia as well -- Pakistan for example and some other markets.
QUEST: All the markets you are in are difficult.
BEJJANI: Most of them are.
QUEST: You are in Lebanon where the economy virtually non functioning. You are in east Africa, where it is very difficult now with the dollar.
You are in, you tell me?
QUEST: How do you manage that?
How do you run a business in a country which has a barely performing economy?
BEJJANI: I would say, the secret sauce is localization. You have to hedge locally and really be serious about it.
Number two, you have to source locally. That is extremely important.
Number three, you have to be committed to these markets because they have the (INAUDIBLE) demographics. And you have to be patient.
These are not markets where you can do a quick in and out. You have to be there, you have to be patient, you have to build your workforce, you have
to build talent and, actually, we have to say that there are many blessings in this feature.
QUEST: To do all that at a time of slowdown, here in Saudi, those issues don't apply. The biggest issue here is how quickly can you spend the money.
BEJJANI: In a way, yes. But we also have an economy that is opening up, an economy that is reforming. We have very deep social reforms that took place
in the past previous years.
And we need time for things to really come in. So we have been here in Saudi Arabia for almost 15 years. We have a huge project coming up. And I
think we are seeing the basic fruits of the efforts that happened in the past five, six years, starting to show. I think we still have 2-3 years
before we get there.
QUEST: What do you need now at this economic time?
Is it capital?
Is it human capital?
What is your priority?
QUEST: Yes, oh, a shortage of it everywhere.
BEJJANI: A shortage of it everywhere and also the ability to get talent to where we need talent, so more productivity in our economies. And so what we
really need is more regional integration. We need the markets.
QUEST: Why do I get the feeling that you are going to talk about a single market or an integrated market or some form of open market?
Which is never going to happen in my lifetime or yours.
BEJJANI: Which is heaven for business.
Why do I want heaven for business?
Because that the only way to do any business. It's the only way to grow into regional (INAUDIBLE) that will be come global (INAUDIBLE). And I think
this part of the world has already takes what it takes to get there.
QUEST: Good to see you, sir, so glad you came in, thank you very much. Thank you.
QUEST MEANS BUSINESS continues, we will take a "Profitable Moment" from Saudi Arabia, a very profitable, after the break.
QUEST: Tonight's "Profitable Moment": this is how they started at FII, invest in humanity.
As I watch those children, those youngsters singing, I just couldn't help but think the discrepancy between the youth and hope of tomorrow and the
mess that we are swirling in, economically, politically and strategically, and the inheritance that we are going to leave behind, that's assuming the
best of scenarios.
The reality is, events like this are important. Not because a decision is taken, a treaty is formulated or anybody goes home with -- well, people
will go home with a contract. It's because it's exposing everybody to the views and thoughts of others, which is why Davos in January, much as I
might criticize ,it is relevant and useful.
So Saudi, in creating the FII -- and there is no doubt many businesses are here because this is where the money is.
Remember that old line, why do people rob banks?
That's where the money is.
Why do people come here?
That's where the money is.
But they also come here because of the change, the experience that's now taking place in Saudi Arabia; the lab, if you like, of economic, social
reform that's happening in front of your eyes.
And so, when you take what you've see all around me, the buildings, the business leaders and you listen to the children, you realize and you
remember how young this country is.
Most of the people are under 30. You realize it is a heady mixture that's well worth visiting and most certainly listening to the children.
And that's QUEST MEANS BUSINESS for this evening. I'm Richard Quest in Riyadh, Saudi Arabia. Whatever you are up to in the hours ahead, I hope
it's profitable. I will see you next time.