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Sunday, February 25, 2024

“Expected Volatility to Maintain Elevated Oil Prices”

Expected Volatility The founder and CEO of Saxo Bank, Kim Fournais, spoke with Khaleej Times in an interview about the global economic situation. Fournais shared his insights into the link between rising energy prices, historical inflation trends, and their impact on today’s economy.

Rising Energy Prices and Inflation

Fournais highlighted that rising energy prices are contributing to increased inflation. He pointed out that geopolitical events, such as the war in Ukraine, are affecting the oil and gas supply, leading to inflation concerns. The situation is complex and interconnected, with energy prices influencing inflation rates.

Historical Inflation and Monetary Policies

The interview delved into the historical perspective of inflation, with Fournais referencing the 1970s and 1980s as the last significant era of inflation. He discussed how central banks have adopted a “higher for longer” policy on interest rates, which can be traced back to previous inflationary periods. Fournais emphasized that the modern monetary theories being used to manage current economic challenges might not be as effective as expected, particularly in the face of rising inflation.

Economic Implications and Challenges

Fournais pointed out that rising interest rates can pose a significant problem for emerging economies. A stronger US dollar resulting from higher rates means these economies need to repay more, which can have a negative impact on their economic stability.

Asset Management and Potential Risks

As equity markets remain high, Fournais noted that some vulnerabilities are emerging. He advised investors to closely monitor asset managers’ portfolios, particularly their fixed income holdings. Fournais highlighted that fixed income, traditionally viewed as low risk, can now be a high-risk component in investment portfolios. He stressed the importance of evaluating factors such as cash flow and solvency in assets, as rapid changes in market conditions can pose challenges.

Fintech in a Challenging Environment

Fournais shared his perspective on fintech and its evolution. He emphasized the importance of financial technology firms being able to navigate challenging market conditions, especially in a changing financial landscape. Fournais pointed out the significance of achieving profitability and positive cash flow, which can be more critical in today’s financial climate.

The UAE’s Supportive Ecosystem for Start-Ups

Fournais praised the UAE’s business environment for start-ups, highlighting its openness to innovation and ease of doing business. He contrasted this with the regulatory challenges faced by businesses in Europe.

Saxo Bank’s Collaboration with Christies

Saxo Bank recently signed an agreement with Christies, and Fournais discussed the creative potential and synergies between art and global capital markets. He expressed enthusiasm for creating engaging events for clients in collaboration with Christies.

Saxo Bank’s Growth in Dubai: Expected Volatility

Fournais mentioned the bank’s growth in Dubai since it began operations in 2009. He emphasized their commitment to providing meaningful services to clients and partners.

Overall, the interview with Kim Fournais offered valuable insights into the global economic landscape, the implications of rising energy prices, and the importance of adaptability and profitability in the financial industry.

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