Renewables are not going to solve the global energy issues anytime soon, and the current volatility in the oil market is likely to keep prices elevated for some time, an expert said.
“Rising energy prices means rising inflation. With the unfortunate war in Ukraine and disruptions in the flow of oil and gas, inflation will remain a major concern,” Kim Fournais, the founder and CEO of Saxo Bank, told Khaleej Times in an interview.
As central bankers around the world seem settled on a ‘higher for longer’ policy on rates, Fournais believes the origins of the current crisis goes right back to the 1970s and 1980s, which was the last big era of inflation. “At Saxo Bank, we foresaw inflation concerns in early 2021, a conversation few engaged in, including central bankers. The journey from rising interest rates pre-2008 to their fall during the global crises, with occasional dives into negative territory, was unprecedented. Modern monetary theories, advocating continuous debt and helicopter money, might not be as progressive as perceived. It’s unrealistic to expect that such measures alone can resolve the myriad challenges we face. The complex interplay of economic factors requires a more nuanced approach.,” he said.
“The current situation has become a major problem, especially with the impacts of the Ukrainian war, surging energy prices, and supply chain disruptions. All these elements are pointing towards another significant crisis.,” he added.
The increasing rates are a big concern for emerging economies. The stronger US dollar means they’ll be repaying more, adding to the burden of higher rates. This debt refinancing will likely have a negative impact on these countries’ economies., Fournais said.
While equity markets remain high, some weaknesses are showing, and this is the time to watch out, Fournais said. “ Many asset managers heavily invested in fixed income, considering it low risk. However, fixed income has proven to be the high-risk component. If stocks also decline, challenges intensify. Key checks include assessing cash flow and solvency. If rates don’t decrease again, a swift turnaround is possible,” he stressed.
Fournais started Saxo Bank as a fintech on September 15, 1992. “Back then, “fintech” wasn’t even a term. In April 1998, we pioneered the first internet trading platform, offering investors unprecedented access to global markets—whether it be stocks, bonds, commodities like oil or gold, or fixed-income products.,” he added.
Fintechs must be able to navigate, especially markets like the ones we see now, Fournais said. “When I started this venture, I had investors that brought in €70,000, which isn’t a substantial amount of money. And that served as my serious A round. Since then, We’ve grown organically, using funds generated internally, and maintained a consistently profitable business. Our acquisitions, too, were financed with our own money. The reason I’m mentioning this is because it sharply contrasts with modern fintechs, many of which go through a series of funding rounds A, B, C, D and so on, with very few of them having turned a profit,” he said.
This approach might work in a low or negative interest rates regime with easy capital flow. “But I think we’re now approaching the ‘moment of truth,’ as I mentioned earlier. If you’re not generating profits, lacking a positive cash flow and constantly depending on others’ money to sustain your business,” Fournais said.
The Saxo Bank founder praised the UAE’s ecosystem for start-ups. “The UAE is incredibly welcoming to businesses in a way that you don’t often find elsewhere in the world. This is a stark contrast to what we see in Europe where the rules and regulations tend to be more challenging,” he added.
Saxo Bank recently signed a partnership with Christies Auction House. “It’s good for a creative mind to be surrounded by all these art pieces. Art resonates with our kind of thinking and innovation. It holds great importance, and I think that art is the very basic form of that. There are many synergies between the people interested in Christie’s and those who have the money to invest not only in art but hopefully also in the global capital markets. So I think for Saxo and Christies to come together and to create some interesting events for clients is definitely something we are looking forward to,” Fournais said.
Saxo Bank began operations in Dubai in 2009. “The business is expanding and we would like to continue to grow the business,” Fournais said. “The prime focus for growth is to enhance our relationships with our clients and partners and to become even more valuable to them in their personal lives or business endeavours,” he added.