International Finance - March-April 2022

March - April 2022

Issue 27 Volume 20

UK £4 Europe ¤5.35

www.internationalfinance.com

US $6

"Access to the best medical care from the comfort of your home"

MSHFA

The Future of Health Care Overseas investors to Dubai 1drive | March - April 2022 | market International Finance

Will the Twitter deal be successful?

"ETF market in ME in nascent stage"

AWARDS 2022

Celebrating Excellence International Finance Awards 2022

Nominations Open for Asia-Pacific Log on to awards.internationalfinance.com

MARCH - APRIL 2022 VOLUME 20 ISSUE 27

EDITOR’S NOTE SUNJAY KUMAR EDITOR-IN-CHIEF INTERNATIONAL FINANCE

Era of high inflation

G

lobal inflation has reached 40-year highs. Many economists believe that the United States is heading for a recession. GDP may show a contraction for the second consecutive quarter. Layoffs are happening too.

All of these characteristics resemble what happened in the 1970s. It was a tough time for the economy due to stagflation.

Stagflation is an economic situation witnessed by persistently high inflation combined with high unemployment and stagnant demand. The root cause of this ugly mix of low economic growth accompanied by high unemployment is inflation.

Since the unemployment and inflation tend to move in opposite directions, many economists believed stagflation was impossible.

However, the 1970s changed that thinking. The United States faced high inflation while struggling with high unemployment.

Today the US inflation is above the Federal Reserve’s target of 2%. As a result, the Fed is aggressively increasing interest rates.

However, now they also have to fix a bloated balance sheet.

Investors have become selective, as higher risk sensitivity mounts due to tighter monetary conditions and rising inflation.

This development has also left the investors wondering if the cure is worse than the disease. Higher interest rates have the intended consequence of lowering demand. But this only serves to increase uncertainty in consumers’ minds about their job security.

It might lead to a vicious cycle where less consumer spending leads to stagnant economic growth, and economic stagnation reduces consumer spending.

skumar@ifinancemag.com www.internationalfinance.com

International Finance | March - April 2022 | 3

INSIDE

IF MARCH - APRIL 2022

IN CONVERSATION

20

IN NASCENT STAGE 46 "ETF IN MIDDLE EAST"

Chimera Capital announced in August that its Chimera S&P UAE Shariah ETF surpassed AED 100 million

FUTURE OF HEALTH CARE The value of the global telemedicine market has been estimated to be $40 billion INDUSTRY

ANALYSIS

BANKING AND FINANCE

38

28 HOW TO MAKE HYBRID WORK RIGHT

ARE STABLECOINS A MISNOMER?

A study by Microsoft titled ‘Work Trend Index’ found that currently, 38% of workplaces in the US have adopted a hybrid policy

Terra said that their algorithm for UST will be based on cryptocurrency Luna

ECONOMY

TECHNOLOGY

52

62

BANK DEPOSITS EXPECTED TO SHRINK

TECH TITANS IN TROUBLED TIMES

Industry experts forecast a decline in bank deposits in the coming weeks due to interest rate hikes by the Fed

Market capitalisation of cryptocurrency reached $2.65tn in 2021

4 | March - April 2022 | International Finance

12

Overseas investors, end-users set to drive Dubai property market

56

Soaring food prices are destabilizing countries

66

Why is Elon Musk's Twitter bid so controversial?

www.internationalfinance.com

16 34

Why private jet usage is soaring

42

Are Cryptocurrencies still worth it?

Jumbo jet soars skies on cooking oils

Director & Publisher Sunil Bhat Editor-in-Chief Sanjay Kumar Editorial Malvika Chawla, Prajwal Wele, Agnivesh Harshan Production Merlin Cruz Design & Layout Vikas Kapoor Technical Team Prashanth V Acharya, Bharath Kumar Business Analysts Alice Parker, Indra Kala, Ayesha Misba, Stallone Edward, Jessica Smith, Rohit Samuel, Brian Johnson, Harry Wilson, Susan Lee, Mark Pinto Business Development Manager Sarah Jones, Sid Nathan, Christy John, Alex Carter, Gwen Morgan, Janet George Business Development Directors Sid Jain, Ryan Cooper Accounts Angela Mathews Registered Office INTERNATIONAL FINANCE is the trading name of INTERNATIONAL FINANCE Publications Ltd 843 Finchley Road, London, NW11 8NA Phone +44 (0) 208 123 9436 Fax +44 (0) 208 181 6550

REGULAR EDITOR'S NOTE

03 06 08

Era of high inflation

TRENDING S Korea’s prez offers aid to N Korea

NEWS WB grants Lebanon $150 million loan

Email info@ifinancemag.com Press Contact editor@ifinancemag.com Associate Office Zredhi Solutions Pvt. Ltd. 5th Floor, Sai Complex, #114/1, M G Road, Bengaluru 560001 Ph: +91-80-409901144

International Finance | March - April 2022 | 5

# TRENDING Apple's market grows by 20%

ECONOMY

S Korea’s prez offers aid to N Korea Yoon Suk Yeol, a conservative political newcomer, was sworn in as South Korea's next president on May 10. He promised to pursue a diplomatic settlement of North Korea's dangerous nuclear program and offered an innovative plan to enhance Pyongyang's economy if it gives up its nuclear weapons.Yoon also addressed South Korea's rising economic problems, claiming that deteriorating job markets and a widening rich-poor divide are driving internal war and discontent.

He stated that he would promote economic growth in order to bridge the significant political rift and income disparities.

Apple observed a 20% increase in its share of the global smartphone market in Q1 of 2022. Data presented by phone case maker Burga indicated that the company’s market share increased by 20% in Q1 of 2022, to 18%, up from 15% in Q1 of 2021. Whereas, Samsung recorded the second-highest growth in market share, rising from 22% to 24%.

Following the rise in both companies' markets, market share from other manufacturers declined, with Oppo and Vivo each losing 20%.

Xiaomi saw a 8% drop.

At a Glance Russia’s important oil export partners China

32.8% Netherlands

13%

Malaysia's IPI up by 5%

US sanctions Russian shipping firms

According to the Department of Statistics Malaysia (DOSM) statement on May 10, Malaysia's Industrial Production Index (IPI) increased 5% year-on-year in March, above expectations. Industrial production was anticipated to grow 5% in March. According to the DOSM, the manufacturing, mining, and energy components of IPI climbed 9%, 7%, and 13%, respectively, on a month-over-month basis. The DOSM said that the IPI rose 5% in the first quarter of 2022, led by 6% and 4% growth in the manufacturing and mining components, respectively.

The US has imposed sanctions on seven Russian shipping companies and all cargo carriers belonging to them over the country’s aggressive warmongering with Russia. This is the latest among the embargoes announced by Secretary of State Anthony Blinken. In a proclamation, Blinken said that the US Treasury and the Department of State have blacklisted the Russian Ministry of Defense's interior transportation organization and six other delivery firms that move its tactical hardware. It has additionally recorded 69 of its boats as impeded assets.

EC ONOMY

6 | March - April 2022 | International Finance

LO G IS T I C S

Germany

8.7%

South Korea

6.9% Poland

5.8% Italy

5.2% Belarus

4.9%

Finland

3.8%

Source- Statista

NEWS | INSIGHTS | UPDATES | DATA

Ones to Watch

TECHNOLOGY

Xbox Design Lab gets louder Xbox Design Lab, Microsoft's official custom controller creation service launched four new pastel colour options — Soft Green, Soft Orange, Soft Pink, and Soft Purple on June 10. The slew of new colours also includes awesome Pride livery. However, the company stated that the price of Pride livery will be slightly higher than the other colours.

Though charging more for the Pride livery may appear impudent, Microsoft has declared that it will donate up to $170,000 to LGBT non-profit groups across the world.

Xbox has also expanded its availability to 11 new countries including Australia, the Czech Republic, Greece, Hungary, Japan, New Zealand, Norway, Singapore, Slovakia, South Korea, and Switzerland.

Xbox said that now the player can create, customize and order their own Xbox Series X|S controller. Xbox also said that various options are created

which include a variety of color schemes that can be applied to the controller's face, triggers, buttons, and sticks, as well as premium extras like engravings, and rubberized grips.

Xbox Design Lab offers custom controllers starting at $69.99, £59.99, and AU$99.95. However, depending on how many features you add to your design, the price will increase.

On the Xbox Design Lab website, the player can try out customization, with live previews showing exactly what your finished product will look like.

By the Numbers

MARK ZUCKERBERG CEO OF FACEBOOK Mark Zuckerberg, once the third richest person in the world, is now over a dozen positions lower in the list of the world’s billionaires.

His wealth and Facebook’s market capitalization have declined by over 50%.

ELON MUSK CEO OF TESLA MOTORS Under the subject line “Remote work is no longer acceptable”, Musk wrote that “anyone who wishes to do remote work must be in the office for a minimum of 40 hours per week or depart Tesla.”

Consumer Price Index rise year-over-year by % (April 2022) United States

8.3%

United Kingdom 7.8% Germany

7.4%

France

4.8%

Japan

2.5%

GAUTAM ADANI CHAIRPERSON OF ADANI GROUP Adani, the world’s sixth-richest person, has added almost $30 billion to his wealth in 2022, more than any other billionaire. His net worth of $106 billion is $10 billion more than Ambani’s.

Source- Statista International Finance | March - April 2022 | 7

IN THE NEWS

FINANCE

BANKING

INDUSTRY

TECHNOLOGY

Lebanon's economy minister Amin Salam said WB loan comes at a time when the country cannot take any instability in wheat inflow

Pillar CEO said that anyone moving to the UK from another country can have a credit card in their pocket before they board their flight and instantly get on the credit ladder

WB grants Lebanon $150 million loan Lebanon's economy minister Amin Salam said that the World Bank approved a $150 million loan to help the country fund wheat imports and to keep bread prices consistent for nine months.

According to Salam, the program, known as the Lebanon Wheat Supply Emergency Response Project will require approval from the country's cabinet and parliament.

Salam explained that the loan comes at a time when the country cannot take any instability in wheat inflow, and also that bread will be accessible in the coming month.

Last month, Salam stated that the government had no imminent plans to reduce bread subsidies, particularly for flour used to make flat Arabic bread, Lebanon's basic staple.

Lebanon is heavily reliant on food imports and pays for them in dollars, which have been increasingly difficult to come by since the country's economy collapsed in 2019. According to the World Food Programme, the Lebanese pound has lost more than 90% of its value, while food prices have increased more than 11-fold.

8 | March - April 2022 | International Finance

The war in Ukraine, which supplies most of Lebanon's wheat, has aggravated the bread crisis, as has Beirut's inability to hold wheat reserves since its largest silos were damaged in the 2020 Beirut port explosion.

Meanwhile, the World Bank has warned the country's leaders that if they want to avoid the complete destruction of the country's social and economic networks then they must adopt a credible, comprehensive, and equitable macro-financial stabilization program.

Saroj Kumar Jha, the World Bank’s director of Mashreq Region said despite early warnings, Lebanon has lost precious time and numerous oppor tunities to adopt a path to reform its economic and financial system. He also said that the cost of inaction is colossal, not only in the daily lives of citizens but also in the future of the Lebanese people.

Lebanon's economy collapsed when it defaulted on $31 billion in Eurobonds in March 2020, with its currency falling by more than 90% in the black market against the US dollar.

Fintech startup for migrants raises capital Often immigrants who have just arrived from across the borders are barred from the banking system across the world, and that creates difficulty in acquiring credit despite fair worthiness. Determined to counter this prejudicial issue, a UK-based fintech startup, Pillar has recently succeeded in raising 15.6 million in pre-seed financing.

The funding was driven by VC firms— Global Founders Capital and Backed VC. Various high-profile angel investors have additionally added to the tally, including the pioneers behind WageStream, Peter Briffet, and Portman Wills along with the stalwart financial backer and previous VP and financial backer of AirBnB Oliver Jung.

Established in 2021 by notable Revolut graduate Ashutosh Bhatt and experienced fintech CTO, Adam Lewis, Pillar's innovation will furnish people moving to new nations with admittance to an assortment of credit items in their new areas, that would have been impossible until recently.

With the current state of the disconnected credit referring ecosystem, an individual cannot enjoy their credit scores from a foreign country.

In that capacity, practically all settlers wind up avoided from the traditional banking system or other regulated financial entities. Even those who had the luxury to access credit had to settle for higher than market rates.

Bhatt said that ever since he moved to the UK and found he could not access any of the everyday products that he had in India this has been a problem for him and he was passionate about solving them.

He noted even a year later the problem was not changed and then he decide to set upon a building to solve this massive problem faced by financially secure people moving to a new country.

Bhatt also added that through Pillar, anyone moving to the UK from another country can have a credit card in their pocket before they board their flight and instantly get on the credit ladder. He said that he wanted to take this service globally.

A number of recently funded startups have been trying to solve the problem of providing credit products to those who are ‘credit invisible’, including Yonder, which recently raised £20m in seed funding.

International Finance | March - April 2022 | 9

IN THE NEWS

FINANCE

BANKING

INDUSTRY

TECHNOLOGY

Microsoft's streaming stick will be similar to Amazon's Fire TV Stick, allowing users to access the Xbox Game Pass library via Xbox Cloud Gaming

Microsoft to launch streaming stick

MoneyMatch gets backing from KAF

Microsoft is planning to come up with a new way to play Xbox games without a traditional console.

In order to do that, the company is reportedly working on a streaming stick that will connect to TVs. According to VentureBeat sources, the device is similar to Amazon's Fire TV Stick, allowing users to access the Xbox Game Pass library via Xbox Cloud Gaming, along with streaming movies and TV platforms.

The report also suggests that Microsoft is working closely with Samsung to develop a native smart TV app that allows customers to stream Xbox games without investing in standalone hardware.

Malaysian fintech startup MoneyMatch declared that it is one of the members of the consortium driven by KAF Investment Bank which was chosen to get an Islamic computerized financial permit in Malaysia. Along with MoneyMatch, the consortium includes Jirnexu, the most popular for their examination site RinggitPlus, as well as Carsome, an advanced commercial center for utilized vehicles that arose as Malaysia's most memorable unicorn.

Following the fruitful advanced financial permit application as a feature of the KAF-drove consortium, MoneyMatch will continue on its Series B funding. The company is in conversation with a few regional institutional financial backers and will close the round by the first half of 2022.

The world’s top business cities in 2022

Cities ranked according to the Global Business Cities Index (as of Jan 2022)

Hong Kong

Paris

Amsterdam

Singapore

London

Frankfort

Tokyo

Oslo

100

95.08 10 | March - April 2022 | International Finance

94.63 90.71

90.70 90.04

89.70 89.63

The index consists of four subindices with different weights: Economy, Society, Operational Environment, and Charisma

Source: Statista Global Business Cities Report

El Salvador was the first country to accept BTC as an official currency

El Salvador prez buys more BTC

EasyJet to reduce crew size

The president of El Salvador Nayib Bukele has revealed that his administration has purchased another 500 bitcoins. Following his country's obtaining of 500 BTC at the cost of $30.744k per coin. President Bukele gladly tweeted, "El Salvador just purchased in the plunge!"

The amount of the country's most recent buy came to $15.3 million, implying that the little Central American nation currently has an incredible $72.5 million worth of bitcoin in its vault.

Notably, the country was the first to accept BTC as an official currency.

Current financial developments have seen Bitcoin (BTC) hit lows unheard of since July 2021. BTC momentarily plunged to $30,000 in May 2022.

EasyJet plans to eliminate seats in a portion of its planes this mid-year as a part of a maneuver to cut the quantity of staff it needs.

The aircraft is considering taking out the last line of seats from around half of its Airbus A319 jets to decrease the manning prerequisites.

Airlines are legally mandated to give one individual crew for every 50 seats. By eliminating the last line of six seats on its littlest plane, the A319, EasyJet will cut the number of travelers it can convey from 156 to 150, subsequently restricting its necessity to three staff from four.

Top nations by market value (Market cap $ tn)

USA

44.73 Source: Bloomberg

China

10.43

Japan

5.5

Hong Kong

5.4

India

3.2

International Finance | March - April 2022 | 11

INDUSTRY

ANALYSIS

REAL ESTATE DUBAI PROPERTY MARKET

First-time buyers, District 2020 also leads demand for residential properties in the UAE

Overseas investors drive Dubai property market IF CORRESPONDENT

According to a Coldwell-Banker Richard Ellis (CBRE) report, foreign investors, end-users, and District 2020, a human-centric city of the future, evolved from Expo 2020 as a mixed-use community that promotes well-being, will continue to drive Dubai real estate sector’s growth in 2022.

The residential The CBRE stated that the market UAE offers a complete lifestyle in Dubai with excellent infrastructure witnessed a to the property buyers. record first According to Mortgage quarter as the Finder, a tech-enabled total volume of mortgage consulting service transactions powered by Property Finder reached 7,865 said that roughly 82% of in March 2022, mortgages in the UAE up 83% in were from first-time buyers 2021 intending to live in the property in 2021.

The UAE residents made up the majority of borrowers at 94%, while 90% of borrowers opted for fixed-rate mortgages.

The residential market in Dubai witnessed a record first quarter as the total volume of transactions reached 7,865 in March 2022, up 83% in 2021.

Total transaction volumes for the year ended March 2022 were 19,009, the highest total reported in any year's first quarter. Off-plan sales surged by 94% in the first quarter of 2022, while secondary

12 | March - April 2022 | International Finance

market sales increased by 76%.

According to another research report, Dubai real estate is projected to continue its golden run after Expo 2020 which ended in March 2022, as foreign investors return to the market to take advantage of the UAE's investment potential.

Average property prices in Dubai increasing The report noted that average property prices in Dubai increased by 11% in March 2022. During this time, average apartment prices climbed by 10%, while average villa prices increased by 20%.

The average apartment price in Dubai was $30 per square foot at the end of March 2022, while the average villa price was $344 per square foot.

Compared to the highs witnessed in late 2014, these rates per square foot for apartments and villas are 26% and 12% lower, respectively.

Downtown Dubai has the highest average sales rate per square foot in the apartment market, at $550 per square foot. In the villas segment, Palm Jumeirah had the highest average sales rate per square foot at $792.

Average rents increased The average rent climbed by 13% in the year to March 2022, with average apartment and villa rents increasing by 12% and 22 %, respectively.

The average apartment and villa rents in March 2022 were $21,780 and $64,917 per year. The Palm

Jumeirah rental market had the highest average yearly apartment and villa rents, with average asking prices of $53,766.

Overseas investors are back According to Zoom Property Insights, the Dubai property market attracted 52,415 investors in 2021 and recorded 72,207 new agreements worth a total of Dh148 billion in various UAE projects. It indicates a 100% increase in investment value, as well as increases of 65% and 73% in the number of investors and investments, respectively.

The Zoom Property Insights said, in 2021, foreign investors made 51,544 investments worth Dh99 billion, accounting for around 38,318 of the total investors. The Zoom Property Insight also said that this increasing momentum will continue throughout 2022.

The UAE is preparing for the International Property Show (IPS) 2022, which will attract more foreign investment. Starting from August 2022, it will welcome investors from Spain, Serbia, Montenegro, Austria, the United States, Ecuador, Canada, and Mexico.

According to Ata Shobeiry, CEO of Zoom Property, the infrastructure, lifestyle facilities, and

visa reforms are some of the primary reasons supporting the return of investors to the Dubai property market.

Ata Shobeiry said that Dubai's superb infrastructure, long-term visa options for foreign investors, and world-class facilities are just a few of the factors that draw in foreign investors.

Sustainability, economic prosperity, market diversity, and good returns are just a few of the other primary reasons why investors return to Dubai real estate.

He also said that Expo 2020 plays a major role and the market will see a major boom in the coming months of 2022.

Mortgage financing plays key role Mortgage Finder's managing director, Mohamad Kaswani, stated that the company saw remarkable growth in 2021, with transactions exceeding the previous two years combined.

According to data from the Dubai Land Department, the mortgage business had a record-breaking year in 2021, with transaction values surpassing previous highs by 26% from 2017.

Mohamad Kaswani said that he is energized by seeing residents choosing to put down firm roots by purchasing their own homes in UAE. He said that the company had noticed the trend after following the lifting

International Finance | March - April 2022 | 13

INDUSTRY

ANALYSIS

REAL ESTATE DUBAI PROPERTY MARKET

of COVID-19 lockdown restrictions back in mid-2020 and since then the trend has not slowed down.

He also said that the improved alignment between valuations and purchase prices makes the mortgage process far easier for buyers. Furthermore, it is also a sign of maturing market behavior as valuations moved in line with market changes, he added.

District 2020 holds the key Ata Shobeiry said in addition to the return of overseas investors, the transition of Expo 2020 into District 2020 also stimulate the Dubai property market in 2022.

He also said that District 2020 will continue its legacy as a sustainable and human-centric future metropolis in the coming Expo. It will feature expansive business and retail spaces along with modern co-living, loft, or urban-style residential units.

Haider Tuaima, director and head of real estate research at ValuStrat said that they will reuse 80% of the present Expo 2020 site and will become one of five key urban centers under Dubai's master urban plan 2040, which was revealed in early 2021.

District 2020, a future legacy of Expo 2020, will include more than 200,000 square meters of LEEDcertified business and residential space, as well as 45,000 square meters of green space.

The location has a direct connection to the metro system, and three main motorways, and is 90 minutes from three international airports and one seaport, Tuaima said.

14 | March - April 2022 | International Finance

Apartment prices in 2021

Dubai Abu Dhabi Villa prices in 2021

Dubai Abu Dhabi

-4.0% 0.01% 10% 6%

UAE property prices between the years 2015- 2020

Dubai 2015 2016 2017 2018 2019 2020

-0.1% -0.4% -3.9% -8.6% -6% -7.1%

Abu Dhabi 2015 2016 2017 2018 2019 2020

-0.8% -3.7% -9% -6.9% -7.5% -2%

Source: Propertymonitor

The demand has already been demonstrated from the signing of technology and innovationfocused anchor tenants such as Siemens, Terminus, DP World, and Siemens Energy.

Tuaima while citing its location and modern infrastructure said that on a strategic level there is no doubt

that District 2020 will be a thriving hub for international business and act as a significant catalyst for the entire city.

According to a recent Ernst & Young report titled 'Expo 2020 Dubai's Economic Impact', the event bought around Dh122 billion to the UAE economy.

While the tourist, hotel, and food and beverage industries accounted for the majority of the revenue. Also, there has been a noteworthy increase in demand for leased flats as a result of an increase in visitors to Dubai.

In terms of future trends, Expo 2020 has opened a new focus for investors in areas such as Business Bay, Jumeirah Village Circle, Sports City, Barsha South, and areas close to the Expo site.

While hotel occupancy remains low, the development of Maktoum Airport is expected to result in a significant boost in tourism to these locations. There has been an influx of tourists who have been working from home, and this is projected to continue.

Upward trend to continue According to Husni Al Bayari, chairman and founder of D&B Properties, the Dubai real estate market will continue to rise in 2022.

Al Bayari said in the new quarters of 2022, the UAE remains bullish on the off-plan and secondary markets. Prime locations continue to be in great demand, with many transactions taking place in the offplan and secondary markets, he added. He also said that with Expo 2020 Dubai, outstanding resident visa alternatives are becoming more accessible. UAE anticipates

significant growth in sustainable, innovative projects in Dubai, attracting even more end-users, investors, and a new generation.

New projects to boost the market Meanwhile, according to data issued by the Dubai Land Department (DLD), the real estate sector in Dubai will be back in the spotlight and it is displaying strong signals of long-term growth.

According to a survey of property analysts Dubai house prices are expected to grow 3% in 2022 and 4% in 2023, up from 2% and 3% three months ago.

According to the poll, the Dubai residential property market will remain stable for the next few years, with a little increase in prices. On the one hand, this shows affordability, while on the other, it indicates long-term growth.

Dubai now has a favorable climate for investment in properties, which gets further endorsed by leading real estate players who are planning new projects. Danube Group, for instance, is one among them.

The off-plan housing segment performing well in Middle East.

In Dubai, off-plan property sales increased significantly in 2022. In February 2022, off-plan properties recorded Dh4.95 billion, or USD 1.3 billion, across 2,599 sales deals.

This is the largest sales value for off-plan property sales in Dubai since December 2013, and it represents an eight-year high. It is also the most off-plan trade in a single month since November 2019.

According to the survey, Arabian Ranches 3 and Villanova had the most off-plan villa and townhouse sales. In Arabian Ranches 3,187 apartments were sold, while in Villanova, 157 were sold. Tilal al Ghaf, with 79 units, Dubai South, with 58 units, and Mohammed bin Rashid City, with 16 units, were among the other locations of interest.

According to demand for off-plan property, in August, the top regions for villas and townhouses in Dubai were Dubai Hills Estate, Arabian Ranches, Palm Jumeriah, Damac Hills 2, and Mohammed bin Rashid City.

Off-plan apartments were in high

demand at Dubai Marina, Downtown Dubai, Palm Jumeirah, Business Bay, and Jumeirah Village Circle.

In addition, the average transaction price for off-plan property in Dubai increased by 53% year over year, rising from around Dh1.2 million in February 2021 to Dh1.9 million in February 2022.

In March 2021, the median price for off-plan apartment sales was Dh1.1 million, up 48% from Dh745,500 the previous year. For the month of January this year, the median price for off-plan villas and townhouses was over Dh1.8 million, up by 2% from Dh1.6 million last year.

Meanwhile, Alpha Dhabi Holding (ADH), a UAE-based conglomerate, purchased an additional 17% stake in Abu Dhabi’s largest property developer Aldar Properties, taking its stake to 30%.

In this latest investment, Alpha Dhabi Holding completed the acquisition of Sublime 2, Sogno 2, and Sogno 3, which together own 17% of Aldar Properties.

editor@ifinancemag.com

International Finance | March - April 2022 | 15

INDUSTRY

FEATURE AVIATION

PRIVATE JET COVID-19

According to aviation data research firm Wingx, around 3.3 million flights traveled around the world in 2021

16 | March - April 2022 | International Finance

FEATURE PRIVATE JET

Why private jet usage is soaring IF CORRESPONDENT

L

ingering health concerns about commercial air travel during the COVID-19 pandemic have fueled a surge in private jet travel in the USA. The multibillion-dollar federal bailout rescued businesses hit by the coronavirus, including billions for airlines stranded due to travel restrictions and safety concerns. According to a report, the pandemic also hit more than half a billion dollars for boutique aviation firms that provide private jet travel to the super-rich people.

Dean Baker, the co-founder of the progressive think tank Center for Economic and Policy Research, told ABC News that the people are subsidizing the luxury consumption of rich people in the country as the bailout money given by the government is of the taxpayer.

The industry experts earlier predicted that private jet operators, like commercial airlines, would face significant revenue cuts. Executives at private aviation companies also said they needed the government's help to keep their employees on the job.

However, several of the same executives openly stated that they saw evidence of a coming boom, spurred by fears of a COVID-19 pandemic.

That prediction has come true, and the once-niche industry transformed into an overnight sensation. Thanks to people willing to spend up to $20,000 for a

International Finance | March - April 2022 | 17

INDUSTRY

FEATURE AVIATION

PRIVATE JET COVID-19

flight across the country. According to industry observers, the popularity of private aviation has now surpassed that of pre-pandemic levels.

Travis Kuhn, vice president of market intelligence at the aviation consulting firm ARGUS International, said that private aviation recovered faster than many other businesses, including airlines. Currently, private air travel is about 15% larger than it was two years ago -- and it is almost all directly attributed to the pandemic.

According to aviation data research firm Wingx, there were 3.3 million flights that traveled around the world in 2021, the most on record. This was a 7% increase over the previous high in 2020, with the United States and Europe leading the way.

Kuhn said that wealthy Americans discovered the time-saving and productivity advantages after flocking to private aviation for the perceived health advantages of avoiding crowded airports and commercial planes.

Also, passengers traveling in a private jet do not even need to enter a terminal building in many circumstances. Instead, the limousine pulls up alongside the plane on the tarmac. Passengers only have to rest in a plush leather armchair, and a cheerful member of the cabin crew will give you a drink of champagne, he added.

Funds collected in 2021 According to a study by Accountable.

US, a government monitoring group, in 2021, private aviation firms collected up to $643 million in government funds from the Payroll Support Program, the Paycheck Protection Program, and the Economic Injury Disaster Loan Program for small businesses. The Payroll Support Program's subsequent

18 | March - April 2022 | International Finance

iterations delivered considerably more funds to the private jet sector.

The overwhelming majority of funds delivered to private aviation firms came as grants that did not require repayment as long as recipients did not engage in involuntary furloughs or terminations of employees. However, some critics urge fast-recovering companies to repay some of the funds.

Kyle Herrig, the president of Accountable.US, said that many private aircraft companies are celebrating increased wealth and opportunity these days, regardless of government assistance.

He urged taxpayers to pay taxes back.

Among the biggest bailout recipients, OneSky Flight, an Ohio-based commercial aviation portfolio that includes brands like FlexJet, Sentient Jet, and PrivateFly, got $81 million from a fund set aside in the Coronavirus Aid, Relief, and Economic Security (CARES) Act to assist airlines.

Other commercial aviation like FlexJet,

Sentient Jet, and PrivateFly received more than $50 million each.

OneSky executives have described the company as catering to a high-net-worth clientele, primarily corporate clients and frequent wealthy flyers. Celebrity clients, including astronaut Buzz Aldrin and golfer Bubba Watson, have endorsed the companies on social media, as well as references to their support of thoroughbred horse racing and an annual snow polo tournament in Aspen.

When OneSky approached the federal government for bailout funds, the company executives emphasized the need for funds for their pilots and flight controllers.

Dan Hubbard, a spokeswoman for the National Business Aviation Association, said these companies like OneSky request federal funding for the same reason as many other small businesses did to keep employees on the job. She also said this crisis-moment investment worked -- as it has in other

FEATURE PRIVATE JET

pandemic, from mid-March to May 2020.

Doug Gollan, the editor of Private Jet Card Comparisons, a blog covering the world of private aviation, said that the industry's success now is a sign of how successful the CARES Act was in getting these businesses back on their feet.

Gollan explained that the funds were intended to assist businesses in navigating the crisis. He said that the CARES Act made private aviation the poster child for success stories.

Kenn Ricci, the CEO of OneSky Flight's parent company, recently told Bloomberg Media that business has improved, and he also plans to increase his fleet by 40% in the coming year. The recent success of private aviation has caused the demand for new aircraft to drastically outpace the supply.

Rising consumer demands industries -- supporting employees and paving the way for their companies' gradual recovery.

However, critics argue that private aircraft operators could have afforded to assist their staff for a limited period if they anticipated that business would rebound, as several industry officials openly stated at the time.

According to Steve Ellis, vice president of Taxpayers for Common Sense, the success of these companies so soon after accepting government support, which also undermines the spirit of the programs. He said during the pandemic private aviation industry profited from greater interest. Thus, they got taxpayer money, and business skyrocketed.

Despite the criticism, several industry insiders believe the private aviation stimulus was necessary.

Private jet operators, just like wellknown commercial airlines, saw a major income decrease during the peak of the

JetClub, a private aviation company, claims they are having trouble getting enough new planes to meet demand.

Vishal Hiremath, the company cofounder, said they need additional airplanes, but their OEM (original equipment manufacturer) partners can not make enough.

The experts predicted that one issue that may start to dampen demand for private planes is rising fuel prices. The passing on to passengers of the large increase in the cost of aviation fuel because of the ongoing crisis in Ukraine - could start to affect demand for private flights. Jet fuel is currently more than twice the price it was last year.

Justin Crabbe, chief executive of Jettly, a technology company making private air travel accessible through a mobile app, said that they do not know how high the fuel prices will soar. But he believes it will be very impactful on the market. On the other hand, private jets have never been

inexpensive. Users can typically deduct these from their company expenditures rather than paying out of pocket. Crabbe said if one wanted a private jet to fly six people from London to Ibiza, it would cost around $28,000 (£23,000).

Environmental impact of private jets US firm JSX Spokesperson, Benjamin Kaufman raised a question about the environmental impact of private jets.

According to the cleaner transport campaign group Transport & Environment, private jets are five to 14 times more polluting than commercial airlines on a per-passenger basis.

The private plane industry counters that it encourages passengers to carbon offset. Some companies are also experimenting with biofuels and electric, hydrogen, and hybrid aircraft.

Ian Moore from VistaJet said his company is committed to becoming carbon neutral by 2025. He said the company had established a sustainability project under which over 85% of members offset CO2 emissions relative to their flights' fuel consumption.

However, Anna Hughes, director of Flight Free UK, is not convinced. Her organization urges people to make a year-long promise not to fly. She said people should do everything to reduce emissions and question whether private jets are an appropriate form of transport.

According to her, no offsetting scheme can make up for the huge emissions of taking a private flight. She said that trees take a long time to grow, but flight emissions are immediate. She also said that the most reliable way to reduce emissions from flights remains the simplest one - fly less. editor@ifinancemag.com

International Finance | March - April 2022 | 19

Future of Health Care in Kuwait and IF CORRESPONDENT

the rest of MENA The value of the global telemedicine market has been estimated to be $40 billion

20 | March - April 2022 | International Finance

COVER STORY MSHFA

International Finance | March - April 2022 | 21

INDUSTRY

COVERSTORY MSHFA

HEALTHCARE

The coronavirus pandemic has changed life for the past several generations. Stringent lockdowns and mandatory masks have had irreversible impacts on the life of all and sundry.

As a fallout of the restrictions introduced during the pandemic, there has been an unprecedented proliferation of online services across industries. But even after the peak crisis was dealt with, life as we knew before, could not be brought back to normal instantly.

The airspace was closed for over a year in Kuwait and many areas were subjected to lockdowns. People were deprived of regular medical check-ups and specialist consultations.

The restrictions imposed as part of the lockdown had caused mental hardships and posed a thorn to general wellbeing. This was an opportunity for setting up remote health care services.

Telemedicine, as we know it today in the wider world until this point, was a niche textbook possibility in Kuwait without any existing player. All of a sudden there was a need for a hard pivot overnight to ensure safe interaction of doctors and patients and to stop them from falling prey to the rising infections, chronic illness and mental disorders.

Dr. Yasmin Abdulghafour, Chief Operating Officer of Central Circle, the largest medical distribution company in Kuwait, saw this challenge as an opportunity.

She and her four colleagues set on their sails to set up the first virtual healthcare facility ‘MSHFA’ (available as a mobile app) in Kuwait that would provide virtual consultations and health care service, particularly relevant with the onset of the pandemic.

With this goal in mind, the hunt for a practical solution led to numerous meetings with web developers. The changing nature of the pandemic in the form of different variants dominating the infection cycle made the challenge harder than earlier perceived.

However, the team led by Dr. Yasmin remained adamant in the face of adversity to ensure that the MSHFA platform sees the light of the day. Dr. Yasmin’s idea was to give access to complete health

22 | March - April 2022 | International Finance

care solutions to patients from the comfort of their homes. This was the key idea behind the platform.

Through the app, patients can attend walkin clinics relating to family medicine and general practice and scheduled consultations for Obstetrics & Gynaecology, Dermatology, Psychiatric Care and Mental Health, with plans to extend services in the near future. Additionally, patients can also seek lab testing appointments and delivery of medicines to one’s doorstep.

The company does not want to make its mark as not only one of the first movers in the segment that offers these novel services, but it also intends to have a lasting impact on the health outcomes of the population it serves.

“The goal is to provide pioneering medical services which can reflect greatly on the health outcomes of the population we serve.

The idea is to allow everyone access to exceptional medical professionals, ensuring early diagnosis, management, and preventive care,” says Dr. Yasmin.

She adds, “MSHFA represents the next generation healthcare industry business model, which is an example of a platform-like business where value is created through the interaction between independent stakeholders, patients, physicians, health care providers, payers and suppliers, similar to leading e-commerce businesses such as Facebook, Uber, or Ali Baba, but in the health care market space.”

MSHFA is also using technology to liaise with existing clinics health care facilities within Kuwait and and Gulf Cooperation Council (GCC). While online services remain a focus, the company wants to establish a firm grounding among the public.

A void to fill Market research initiated by the shareholders of MSHFA found that the existing national and regional healthcare system did not meet the rising demand for chronic disease management, mental healthcare services, and medication reconciliation.

The study found that while the value of the global telemedicine market was estimated to be $40 billion, the market in Kuwait and adjoining

COVERSTORY HEALTHCARE

countries were not yet developed to adequate levels.

According to industry analysts, the telemedicine industry was valued at approximately USD 38,289 million globally in 2020, and it is expected to witness a revenue of USD 168,396 million in 2026, with a CAGR of 28% over the forecast period 2021-2026.

This is the void that MSHFA is keen on filling under Dr. Yasmin’s stewardship. In the short term, the company wants to focus on Kuwait and gradually build a presence in the adjoining regions of the Middle East and North Africa.

MSHFA feels due to certain demographic factors, the region will be an ideal springboard for the budding enterprise. The MENA region, especially the GCC countries, have an aging population and are suffering from a high burden of chronic illnesses. At the same time, there is a dearth in the quality and quantity when it comes to the presence of health care facilities.

This imbalance in the demand and supply leaves ample opportunity for innovative, technologybased solutions to positively contribute to the betterment of the entire landscape. MSHFA aspires to be a value-based healthcare delivery organization, promoting efficiency, effectiveness.

Privacy in focus Dr. Yasmin describes MSHFA as an innovative product in the regional telemedicine market which can improve access to essential high-quality healthcare services from the comfort of your home.

While MSHFA prioritizes giving its users the best possible healthcare facilities, there are no lacunas in the platform about cyber security. The team at MSHFA is committed to giving health care service the same importance as it does to the privacy of its users, with a system that is fully compliant with European and American data security standards.

In a short time in the market, MSHFA has established itself as a unique, innovative, telemedicine delivery platform where various stakeholders can interact and exchange services safely and effectively without any privacy scares.

Being a remote-first entity, MSHFA wants to

expand itself as a global player and soon it wants to cater to patients around the globe and not limited to the MENA region.

MSHFA operates with the philosophy of their CEO which is that healthcare being a fundamental human right is the prime pillar of any community. Given that any member of the community is equally vulnerable to illness, disease, and accidents, adequate healthcare and management are critical for the long-term health of society. This, in turn, will also contribute to a stable economy.

Dr. Yasmin’s early career Before donning a corporate hat and becoming one of the first few female COO’s in Kuwait, Dr.

International Finance | March - April 2022 | 23

INDUSTRY

COVERSTORY MSHFA

HEALTHCARE

Yasmin was part of the public health system of Kuwait under the Ministry of Health.

She has two decades of experience as a family physician after she completed her Bachelors of Medicine & Surgery in 2000 and found her place in the board of family medicine in 2008, with an appointment as a member of the UK’s Royal College of General Practitioners. She recently finished her Masters in Healthcare Administration in 2020.

At the start of her career, she was involved with the working of Kuwait’s Ministry of Health and work on public healthcare initiatives. Right from the start, she understood the importance of the policy.

During her career at the government, she functioned as Director of International Health Relations, and Director of Planning, the roles which dabbled in health diplomacy and liaising with external departments like the Ministry of Foreign Affairs, to facilitate dialogue between domestic and international companies, promoting excellence in the sector. Later in the Ministry of Health, she also worked with the Supreme Council of Planning, drafting health care reform plans in Kuwait. She also worked with various international health organizations

namely the World Health Organization on public health policies. During her time in Ministry of Health, she realized that technology was not well incorporated in medicine within Kuwait and the GCC, not to the extent that could revolutionize medicine, and saw the importance of the private sector in developing healthcare. It was in her role at the helm of Central Circle, she found the gaps in the market which were more prominent in the wake of the COVID-19 pandemic. She found that accessing medical services became both dangerous and difficult. This also triggered her mind to explore the concept of home-based medical solutions and she decided to initiate and develop the idea of the first virtual healthcare facility, within the State of Kuwait.

Even before the onset of the pandemic, she came to know about various advancements in the international healthcare equipment market and the advent of emerging technologies in the pharmaceutical and medical technology sector.

She developed a special interest in leveraging technology to advance the cause of healthcare and felt that there was much more needed to be done to ensure that the medical industry adopts and embraces technology like other industries.

As MSHFA continues on its growth path, International Finance Magazine sat down for an exclusive interview with Dr. Yasmin, where she talks more about the company, herself, and her thoughts behind steering the change in the healthcare space.

You have been a practicing doctor, then an administrator, and now an entrepreneur. How does all of this align?

I had a keen interest in medicine from childhood.

The ability to treat a person and cure specific ailments is what triggered my passion for medicine. I was also an academically inclined child, with a natural competitive edge and flair.

So, medicine seemed a natural career path.

Today medicine is advancing at unimaginable speed. The incorporation of information technology, especially artificial intelligence,

interests me the most. This hybrid model of medicine fascinates me. So, my roles over the years may seem incoherent, they are all part of the same arc.

You started your career in the public sector.

What prompted you to shift?

I was contacted by Central Circle Company, the largest distributor of medical equipment and medicine, within Kuwait as they offered me the role of Chief Operating Officer. I was apprehensive about taking up the assignment,

COVERSTORY GLOBAL ENERGY CRISIS

Source: Eurostat

International Finance | March - April 2022 | 25

INDUSTRY

COVERSTORY MSHFA

HEALTHCARE

26 | March - April 2022 | International Finance

COVERSTORY HEALTHCARE

but the prospect of working in the private sector, learning new skills, managing a team, investing in people. Additionally, the appointment was one that few women had been offered.

Was there anything in particular that you were looking forward to?

I was fortunate to be one of the first few female COOs, within the medical field, in Kuwait, who was asked to lend expertise and assist in implementing change. The company was keen to tidy up its operations and invest in its existing and future staff. I was, therefore, keen to avail myself of this opportunity.

Additionally, I was keen to experience the other end of the spectrum i.e. logistics, supply, partner relationships, distribution, and the overall management.

Whilst working in the public sector, I developed my knowledge of policy and procedures so, naturally, the quest for further insight triggered the jump.

What has been the highlight of your career so far?

My tenure at Central Circle was intense, particularly as COVID-19 began amid my first few months after accepting the appointment.

People were afraid of something that they were unable to comprehend. At the start of COVID-19, testing kits, rapid and PCR tests, and PPT equipment became invaluable to prevent and protect the spread of the virus.

I was fortunate to have access to a huge team who worked with me to facilitate the distribution of such medical equipment during the height of the first wave. It was a challenging time, although, it was a unique opportunity to do something different. I worked with several internal departments and the main objective was to distribute mass testing kits within Kuwait.

I headed the logistics efforts. We fought to get rapid testing kits into Kuwait — an effort that made a significant difference in early diagnosis.

To date, this has been one of my career highlights.

Collaborative efforts and teamwork can build an

effort that is resilient and life-changing. Making sure that all medical supplies reached hospitals promptly.

What was the exact pain point that triggered the idea behind MSHFA? While working at Central Circle Company, I found a gap in the market, COVID-19 made accessing medical services both dangerous and difficult. The concept of home-based medical solutions was sparked and I decided to initiate and develop the idea of the first virtual healthcare facility, within Kuwait, and MSHFA was born. I had a special interest in technology and healthcare and felt that the healthcare sector is always shy to integrate technology, unlike other sectors, I wanted to be a pioneer.

How do you envision the identity of the company?

MSHFA is an innovative product in the regional telemedicine market that can improve access to the needed high-quality healthcare services at affordable rates. MSHFA will bridge the gap in healthcare, particularly to vulnerable individuals who are unable to access medicine due to various barriers. While it will make healthcare more affordable and accessible, the MSHFA platform provides the highest levels of cybersecurity for its users and will guarantee confidentiality for them coupled with medical excellence without compromise. The future of healthcare.

What is the post-pandemic focus for the company in the short and medium-term?

In the next 5 years, MSHFA will expand its services into the GCC. Our primary vision and purpose are to make sure that healthcare services are accessible to all and also to promote virtual healthcare, whilst ensuring that the advice and services offered are truly exceptional. Our goal is to remain pioneers in the medical sector, whilst upholding medical excellence.

For more information about MSHFA, please visit www.mshfakwt.com

International Finance | March - April 2022 | 27

INDUSTRY

FEATURE LOGISTICS

PRODUCTIVITY HYBRID WORK

28 | March - April 2022 | International Finance

FEATURE HYBRID WORK

How to make hybrid work right IF CORRESPONDENT

I

t has been more than two years since the onset of the pandemic, a once-in-acentury phenomenon that cost millions of lives all over the world. It has also shaped the white-collar job scene forever. Never before was there an emphasis on remote work, irrespective of industries.

It made sense as without a foolproof way to protect people from the virus, remote working would ensure that workers are relatively safer. This ensured that productivity was maintained at least to a certain level while workers felt confident within the safety of their homes and with their near and dear ones.

But now, after three major waves of infections and two mandatory doses of vaccination, the risk of contracting a severe infection from COVID-19 is waning by the day. But remote workers who were forced to adapt to work from home without a viable second option are reluctant to come back to the office for more than one reason. So managers and top executives of major companies have settled for the midway approach of hybrid working. This would mean that for a select few days of the week, employees would have to come to the office for several reasons that the top management thinks are non-negotiable.

But the response to this hybrid approach unlike the anticipated ‘best of both

A study by Microsoft titled ‘Work Trend Index’ found that currently, 38% of workplaces in the US have adopted a hybrid policy

International Finance | March - April 2022 | 29

INDUSTRY

FEATURE LOGISTICS

PRODUCTIVITY HYBRID WORK

worlds’ was at the best lukewarm.

A study by Microsoft titled ‘Work Trend Index’ found that currently, 38% of workplaces in the US have adopted this hybrid policy with another 15% more likely to join the bandwagon by the next year.

“One thing is clear: We are not the same people that went home to work in early 2020.

The collective experience of the past two years has left a lasting imprint, fundamentally changing how we define the role of work in our lives. The data shows the Great Reshuffle is far from over. Employees everywhere are rethinking their “worth it” equation and are voting with their feet. And as more people experience the upsides of flexible work, the more heavily it factors into the equation. For Gen Z and Millennials, there is no going back.

And with other generations not far behind, companies must meet employees where they are,” the study noted.

It is not only in the US that this trend has surfaced. Japan, across the shores which is infamous for its lack of work-life balance and long in-office, stays in the pre-pandemic days is seeing a change in the winds too. Fujitsu, a leading IT company in Japan had found that 74% of their total workforce opined that the office was the best place to work in the prepandemic phase. But in a survey conducted in May 2022, an overwhelming 55% of them say that they will like to work from home and office in a flexible manner with 30% opining that they would work from home all the time given an opportunity.

But while it may seem elementary that it is work from home for most of the week and just two days of old-school work from the office, the dynamics in practicality can be a lot different.

No wonder, Microsoft’s CEO, Satya Nadella at the time of releasing the Microsoft 2021 Work Trends Index Annual Report said: “Over the past year, no area has undergone more rapid transformation than the way we work. Employee expectations are changing, and we will need to define productivity much

30 | March - April 2022 | International Finance

1. 53% of employees are more likely to prioritize health and wellbeing over work than before the pandemic

52% of Gen Z and Millennials are likely to consider

changing employers this year, up 3 percentage points yearover-year

2.47% of respondents say they are more likely to put family and personal life over work than they were before the pandemic

53%

In addition, —particularly parents (55%) and women (56%)—say they’re more likely to prioritize their health and wellbeing over work than before

3.58% of employees who plan to spend the most

and least time in-office are doing it for the same reason: more focused work. And there are gaps to fill – managers plan to spend a higher share of their time in-office than non-managerial employees (45% vs. 39%). Moreover, employees surveyed plan to go into the office more than managers expect Source: Great Expectations: Making Hybrid Work Work/ Microsoft

more broadly — inclusive of collaboration, learning, and well-being to drive career advancement for every worker, including frontline and knowledge workers, as well as for new graduates and those who are in the workforce today. All this needs to be done with flexibility in when, where, and how people work”.

Meanwhile, a survey conducted by the Pulse of the American Worker found that 87% of people want to work from home at least one day of the week. 68% of American workers say the ability to work remotely and on-site is the perfect work model.

According to the Remote Work &

Compensation Pulse Survey, only 8% of remote employees are willing to return to work full-time following the pandemic. While 48% of workers prefer to work from home fulltime, the remaining 44% want to work from home part-time throughout the week.

The survey found that around 83% of employees would leave their current job if their pay was reduced as a result of working remotely.

According to Stanford research, 55% of respondents prefer to spend some time at work and some time at home. The report stated that around 25% of workers prefer to work from home full time and 20%

FEATURE HYBRID WORK

63% of high-growth companies An Accenture report noted that regardless of where you are located, ensuring your workforce is healthy and productive will yield bottom-line benefits. The report found that 63% of high-revenue growth businesses are adopting productivity anywhere hybrid workforce models.

The concept of blended workforces is rejected by 69% of organizations with negative or no growth, who prefer all onsite or all remote staff. A hybrid strategy is preferred by 83% of workers.

Meanwhile, employees and employers who participated in the Remote Work & Compensation Pulse Survey in May 2021 expressed a desire to be entirely remote 48% of the time. Hybrid working arrangements were preferred by 44% of employees.

Employers support the mixed work paradigm 51% of the time, while only 5% cite entirely remote work as an option.

Gen Z employees want some form of onsite work

exclusively want to work in an office.

The study also found that some employees would try working from home but soon find it to be too lonely. Some people grew addicted to one of three things: television, refrigerator, or bed, and returned to their office.

A survey by owl labs found that in the United States, 87% of workers would like a 10-hour/4-day work week, while 82% would prefer core working hours.

According to a recent survey by an economist, 34% of respondents claimed that face-to-face interruptions from coworkers are the most common reason they lose attention at work. Working at home made 36% of

respondents feel more focused than working in an office while working in an office made 28% feel less focused.

Does this mean the hybrid model of work may be the superior choice for many businesses? At this point, it may be too early to say but the next couple of years will let us know for sure.

Assessing which roles are most suitable for remote working, onsite working, or hybrid working is important. This will assist in establishing the long-term goals and ambitions for work in the future.

Hybrid work models are used by

Gen Z employees want to experience onsite work in some form, Accenture’s report reveals, despite growing up in an era of selfies, texting, and virtual reality.

More than 74% of Gen Z respondents prefer interacting with colleagues face-toface, followed by Baby Boomers (68%), and Gen Xers (66%).

Will compensation change for remote employees or hybrid employees?

A recent remote work survey by salary.com also found the following. 92% of employers do not have a system in place for determining compensation for employees who work remotely only part of the time. There is no formal mechanism for establishing remuneration for remote workers for 72% of firms.

Over 97% of firms said they will not lower pay for workers who work partially

International Finance | March - April 2022 | 31

INDUSTRY

FEATURE LOGISTICS

PRODUCTIVITY HYBRID WORK

from home. However, 21% of employers would make salary adjustments based on an employee's contribution, geographic location, and worries about company culture. During the pandemic, 9% of employees transferred to another area, making it hard to return to work full-time.

In a survey of 94% of employees, they believe that salaries should be determined by skill set and not where they are located.

In determining remote pay for new hires, 25% of employers take different factors into consideration.

Employers surveyed said they would consider the following factors when determining pay: Competitiveness outside the organization (67%), Competitiveness inside the organization(58%), Cost of living expense (43%) According to 34% of employers polled, a full-time remote employee in a different geographic market would not be hired at the same rate as an on-site employee.

Does the hybrid work model cost more for employers?

In a recent survey conducted by Prudential Financial Inc., 34% of workers said their employers should provide resources to establish a home office. Whereas 33% of workers said their employees should be reimbursed for expenses associated with remote work.

The Remote Work & Compensation Pulse Survey by salary.com found that 51% of employers expect employees to have to return to the workplace. However, provide them with the flexibility to work remotely part of the time.

Should companies pay these workfrom-home expenditures if employees have the option to work in the office full-time?

Businesses will need policies in place when addressing these questions by their remote and hybrid workforce.

Having the same systems for both office

32 | March - April 2022 | International Finance

and remote work could cost employees double for some of the equipment needed.

A few of these include phone systems, fast internet access, security, and more.

Employers will also have to think about hiring remote workers from states where they do not have a physical presence. This could include paying higher unemployment taxes and navigating new labor laws in the state where the person works. Due to contradictory state regulations, employees in some areas may suffer double taxation.

When crafting policies and establishing guidelines there are several things to consider. Businesses should carefully plan and check what specific requirements states require in the locations they plan to hire remote workers. If a company is searching for contract remote workers, staffing services can help them with these challenges.

On the other hand, if there are fewer employees in the office on a given day, businesses will need to lease less office space.

In new leases, employers should also try negotiating a rent deferral or abatement. They should do this in case the state or government declares them ineligible to work owing to a future pandemic.

Synchronous vs asynchronous It is crucial to remember that not everyone has the same working schedule or is in the same time zone when doing hybrid work. Working in an asynchronous manner can be a useful best practice strategy to adopt to increase productivity. Asynchronous communication is the practice of communicating and pushing projects forward without requiring other stakeholders to be available at the same time. Communication in an office is largely synchronous.

In other words, it is far from simple to figure out how to do this. That is because, in order to correctly design hybrid work, you must consider two axes: place and time.

The axis of location is currently

receiving the greatest attention. Millions of workers throughout the world, including Fujitsu's employees, have abruptly switched from being place-constrained (working in an office) to becoming place-unconstrained this year (working anywhere). Many people have also made a change down the time axis, from being time-constrained (working in lockstep with others) to becoming timeunconstrained (working asynchronously whenever they choose).

For best efficiency, a deliberate balance between synchronous and asynchronous is beneficial. Working asynchronously is not a goal in and of itself; it is about being considerate and choosing to forward a topic or project asynchronously when possible.

This allows for more synchronized moments.

Asynchronous work that is extremely capable nevertheless allows for some synchronous dialogue.

Negotiating personal choices The other factor that will ensure the success of hybrid models is how flexible they are to cater to the personal preferences of individual

FEATURE HYBRID WORK

34%

of workers said their employers should provide resources to establish a home office.

Whereas 33% of workers said their employees should be reimbursed for expenses associated with remote work

workers. It can be as simple as some people are most productive at the beginning of the day while some may gather steam post-lunch.

Depending on our particular preferences, our ability to work at peak productivity and performance differ substantially. By considering employees' preferences when designing hybrid work, it will make it easier

for others to understand and accommodate those choices.

Companies on the hybrid path are figuring out how to incorporate their workers' viewpoints. Many companies are providing managers with simple diagnostic survey tools to better understand their teams' personal preferences, work contexts, and key tasks—tools that allow them to learn, for example, where their team members feel most energized, and whether they have a wellfunctioning home office, and what their needs for cooperation, coordination, and focus are.

Maintaining workflows To make hybrid work, one must consider how work is completed. In the age of hybrid labor, it has become far more complicated. And usually, there are two more preferred ways to deal with the issue. As employees shift to more flexible work arrangements, one option is to greatly increase the use of technology to coordinate tasks. Robotic devices that move around the plant can be deployed to aid the work process which can record comprehensive in-the-moment visual data.

This data then can be transmitted back to all team members for examination.

According to studies, many firms still have a long way to go when it comes to remote working best practices and employee well-being.

Longer hours, continuous video conversations, and merging business and personal lives are not conducive to employee contentment over time. According to a survey conducted by Monster, a job-search company, more than two-thirds of remote workers are experiencing burnout symptoms.

The other way is to take this new tectonic shift as an opportunity to re-engineer workflows that are used from pre-pandemic times and in a way, reinvent the wheel or design a new way to move forward.

Existing harmful practices should never be replicated in new hybrid arrangements, as was the case decades ago when corporations began automating work procedures. Many organizations just overlaid new technologies atop existing processes, thereby repeating their weaknesses, idiosyncrasies, and workarounds. Companies typically did not start making use of new technologies until years later, after several costly rounds of reengineering.

The starting point for this can be to figure out if any of the tasks in the current workflow system are unnecessary or needlessly cumbersome. The other aspect to consider is can some of the tasks be automated with the right application of technology. Also, workplaces need to be redesigned to ensure the best possible environment for collaboration, cooperation, and communication.

editor@ifinancemag.com

International Finance | March - April 2022 | 33

INDUSTRY

FEATURE AVIATION

AEROSPACE RENEWABLE FUEL

Jumbo jet soars skies on cooking oil 34 | March - April 2022 | International Finance

FEATURE RENEWABLE FUEL

The world's largest aircraft has a successful test flight fueled by cooking oil and grease

IF CORRESPONDENT

T

he colossus of the skies, A-380, successfully hit the clouds powered by cooking oil.

The fuel used is called Sustainable Aviation Fuel (SAF) and is made by blending cooking oil and greases. The test flight that began from Blagnac Airport in Toulouse was three hours long, and the airplane soared on a single Rolls Royce Trent 900 engine.

A second test flight on March 29 had the A-380 fly from Toulouse to Nice on the same fuel. This trial monitored the SAF performance during take-off and landing.

TotalEnergies, a French company based in Normandy, provided the fuel for the flights.

Sustainable aviation fuels combine sulfur- and aromatics-free Hydro treated Fatty Acid and esters.

Airbus, in a statement, recorded that they have been testing SAF-powered flights for a year. Two other flights, A-319 and A-350, had test flights in 2021. A-380 can currently operate with a 50-50 mix of SAF and kerosene. The company aims to certify all its planes for SAF use by 2030.

Airbus also proclaimed that SAF utilization is the key to achieving a net-zero carbon emission by 2050. The aviation industry's carbon emissions will reduce to 53% from 71% if SAF is mass adopted. Airbus hopes to market the world's first zero-emission aircraft by 2035.

International Finance | March - April 2022 | 35

INDUSTRY

FEATURE AVIATION

AEROSPACE RENEWABLE FUEL

SAF is a product that claims carbon neutrality through the absorption of C02 during the cultivation of its organic ingredients. Certain airlines already use them, but it has failed to win mass appeal as an alternative fuel due to their high costs.

The A-380 is the largest aircraft model, but it has seen a dip in popularity.

The behemoth has low fuel efficiency compared to a modern aircraft. The Dubai-based carrier Emirates ordered the last A-380 Airbus in 2021. Many airlines are seeking more time to integrate this giant into their fleets.

Recently, Airbus announced it would utilize the A-380 for an experimental hydrogen engine to make aviation ecofriendly and sustainable.

Visionaries in Europe Long-distance electric transport seems like a distant dream. For the past decade, engineers have been experimenting to see if renewable fuel from used cooking oil could give us an upper hand in our fight against climate change. Since 2017, some flights leaving Geneva airport have been flying on cooking oil mixed with kerosene. Matti Lievoneen, CEO of Neste, a Finnish company that sells fuel, said that the passengers couldn't tell the difference as the planes were smooth and engine performance improved.

The Finnish company claims its product is less polluting than fossil diesel. They claim that it has 40% less particulate matter and 10% less Nitrogen Oxide. If used unadulterated, the product emits 90% less carbon.

Renewable diesel is also known as biodiesel, though there is a fundamental difference. Vegetable oil and waste fats synthesis produce biodiesel and renewable fuels. However, biodiesel can only be mixed to a certain degree

36 | March - April 2022 | International Finance

with regular diesel before engine modification. Renewable diesel works well without engine modifications, and existing fleets can use it without any alterations.

The process isn't completely free of controversy. The fats for the fuel are collected from slaughterhouses, and animal husbandry causes over 20% of global methane production. The cooking oil comes from the palm oil industry, notorious for large-scale deforestation.

Stiff Chinese competition In 2017, Hainan Airlines flight 497 left an airstrip in Beijing for Chicago. It, too, flew using biological aviation fuel made from cooking oil. Flight 497 was the first China-US flight to use green aviation fuel. The Boeing 787 Dreamliner arrived at Chicago's O'Hare International airport after flying 11,297 kilometers.

Chinese innovation is quickly catching up with its American and European counterparts. The fuel was made from waste kitchen oil in restaurants. Sinopec had shuttled a domestic bio-fueled flight in March 2015.

Cooking oil to jet fuel Aviation accounts for about 2% of global emissions. Biojet commercial development manager at Air BP, Tom Parsons, agrees that it isn't much, but he believes the aviation industry will contribute 3% by 2050 without intervention.

The International Air Transport Association is targeting 50% in carbon emissions by 2050. Parson believes this is a hard-to-reach goal. He added that it is difficult to electrify planes as you can't carry enough battery weight to get those planes off the ground at this point. It explains why cars turn electric while planes are still looking for alternative fuels.

Cost of Sustainable alternative fuel per liter when manufactured from Camelina oil

$0.80/L Palm oil

$0.70–0.79/L Soybean oil

$1.01–1.16/L Source: Forbes

Until recently, restaurant oil waste was dumped in landfills where it decomposed and emitted methane - a greenhouse gas.

Consequently, this negatively affected the environment. Recycling leftover cooking oil and turning it into jet fuel is a sustainable practice.

Tankers first collect used cooking oil from restaurants, food processors, and home kitchens. All sorts of cooking oil can be used, such as vegetable, canola, soy, or animal fats. The home cooking oil is first stored in its original container and moved to a biodiesel collection center.

The American Society for Testing and Materials (ASTM) defines biodiesel as a fuel made of mono-alkyl esters of long-chain fatty acids derived from vegetable oils or animal fats.

The collection is followed by refinement. Used cooking oil has impurities like meat scraps, water, bread crumbs, and other remnants. These are filtered out.

Cooking oil is high in free fatty acids (FFA), which break down molecules under high heat. The fatty acid particles break away from the molecule and start

FEATURE RENEWABLE FUEL

floating freely. They are pretreated before conversion into biodiesel.

Transesterification is the process that turns cooking oil into safe fuel. It is a simple process that combines an ester with alcohol. In biodiesel preparation, the "ester" is cooking oil. It is combined with methyl alcohol, and a small amount of sodium chloride is added as a catalyst, and a reaction sets in.

Catalysts used for transesterification can be divided into two groups. They are either Homogeneous catalysts that operate in the same phase as reactants or heterogeneous catalysts that function differently from their reactants.

Homogenous catalysis usually happens when catalysts and reactants are liquids, and heterogeneous catalysis occurs when solid catalysts come in contact with liquid reactants. They can either be alkali or acidic. Alkali homogeneous catalyst finds use in most commercial production of biodiesel and is preferred to its counterpart.

Tom Parson believes that cooking oil is only one among many alternatives that are available. He said it is possible

to convert solid household waste into fuel and turn excess renewable energy into liquid fuels.

Airbus revolutionizing aviation with hydrogen Airbus leads the designing, production, and delivery of aerospace products and services to customers worldwide.

The company has over 130,000 employees and is the largest aeronautics and space company in Europe. For decades, Airbus has been the pack leader in the aviation industry and has designed many innovations for commercial aircraft.

They have a deep understanding of the market and have a consumer-centric approach to technological innovation.

Airbus also manufactures helicopters, defense, security, and space segments.

The jumbo jet manufacturer will establish a hydrogen technology research center in the UK to accelerate its zero-emission aircraft vision by 2035. The new research center will open in the aerospace firm's Filton facility focusing on cost-competitive cryogenic fuel systems. Airbus claimed

that the technological development for the new center has already begun and will explore a range of capabilities from complete systems to components and cryogenic testing.

The UK operation concentrates on end-to-end fuel system development, and the resulting equipment is essential to hydrogen-run aircraft. It will initiate fully functional hydrogen tank ground testing in 2023 and start flight testing in 2026.

On May 25 in London, Airbus Chief Executive Guillaume Faury said that the first fully decarbonized hydrogen aircraft, the high-speed Lockheed Sr71 that he saw in Washington, was an inspiring innovation.

The American team achieved so much in so little time that Faury said that Airbus would make its hydrogen plane.

The chief executive was convinced that the plane manufacturer could produce a zero-emission product by 2035.

The UK government is extending $860 million to aerospace technology to support low-emission aircraft innovation. editor@ifinancemag.com

International Finance | March - April 2022 | 37

BANKING AND FINANCE

FEATURE CRYPTOCURRENCY

STABLECOINS

Are stablecoins a misnomer?

IF CORRESPONDENT

38 | March - April 2022 | International Finance

C

ryptocurrencies, which had surfaced in the late 2000s with the creation of the first Bitcoin or BTC by the pseudonymous yet well-known Satoshi Nakamoto, had come close to being mainstream in the late 2010s with the advent of the idea of Web3.0.

Cryptos was pegged as an integral part of the next generation of web systems which painted the possibility of a decentralized ecosystem beyond the

FEATURE STABLECOINS

The promise of TerraUSD seems to have gone bust for good

overarching control of the ‘Big Tech’ and governments.

By March 2022, the market cap of all cryptos had reached $1.7 trillion across the globe despite suffering a massive slump in prices since the peak of November 2021.

But now, it seems finally the juggernaut has stopped at least temporarily. The most prevalent and most valuable cryptocurrency Bitcoin itself had taken a massive hit. It was trading only at around $30,000 in mid-May, a massive drop from around double that price from its all-time high of November 2021. This was not an isolated phenomenon experienced by

investors of BTC but also all major cryptos like Ethereum, and Dogecoin suffered a massive fall in their values consistent with the crash in the equities market.

While this slump has wiped off wealth to the tune of trillions of dollars from investors irrespective of their risk appetite, it was not very surprising despite the extent of its slide.

Cryptos always had the promise of volatility as it had of anonymity. Another key function of stability has been outlined by Lukas Schor, a product manager at Gnosis, a DeFI company.

In his blog, he explained that in addition to the two characteristics of being a medium of transactions and a storage of value, stable coins offer a degree of reliance to conduct a transaction without having to worry about too much fluctuation.

“For any currency, stability is crucial to trade goods and services without the risk of either the buyer- or seller-side losing

International Finance | March - April 2022 | 39

BANKING &FINANCE

FEATURE CRYPTOCURRENCY

value as a result of the price volatility.

For cryptocurrencies specifically, price volatility prevents mainstream adoption of applications built on top of the cryptocurrency protocols,” he eloquently spelled out. He advocated the usage of stable coins as a useful bridge between crypto and centralized finance.

So, what if some investors or regular everyday persons liked the idea of cryptos as a hassle-free anonymous, cross-border currency without its super volatile region. Along came the idea of stable coins in 2014.

What gives stablecoins stability?

Primarily the idea is simple. Suppose there is a cryptocurrency that can always trade at a value equal to a fiat currency like the US dollar or the Great Britain Pound or the Euro. This essentially means that adopters of this cryptocurrency will be assigned a token for every fiat currency parked in a bank account. The benefit of this exercise is that once one has that token, which is unique like currency notes, can be transacted across borders and with complete anonymity over the web.

The promise of such crypto stable coins came that since it’s guaranteed for the said fiat currency, one can get back the same once they choose to return the token to exchange or the coin issuer. An example can be that of USDT, which is more popularly known as Tether, which is supposedly equal to a dollar.

As stable coins like Tether got popular, there was an advent of another bunch of cryptocurrencies that promised similar notions of stability. But there was a catch. There was not necessarily a unit of such said fiat currency parked in a bank account for every token issued as the tokens or currencies. Instead, the value pegged at say a dollar or any

40 | March - April 2022 | International Finance

STABLECOINS

other central bank-issued currency, was artificially maintained through an algorithm. While it seems possible in thought, for the algorithm to work in actuality there is a need to devise another cryptocurrency on which this altcoin is pegged.

One of the more popular altcoins is TerraUSD or UST which was introduced in September 2020 by a company named Terraform Lab. “Tether created a new category of digital assets riding on a public blockchain that were backed 1:1 by fiat assets held in a banking institution, which we now call fiat-backed stablecoins. In the wake of Tether (also known as USDT) and USDC, a variety of other fiat-backed stablecoins sprouted up, and the fiat assets under custody (AUC) held by each project ballooned as interest in these coins grew,” explained Arthur Hayes recounting this phenomenon in his blog.

And by mid-May, the company was the eye of the crypto storm even by the wide margins of volatility associated with the crypto ecosystem. A majority of $18 billion worth of investments in the tokens issued by Terraform almost went bust. This in turn triggered a sellout of the entire crypto market with BTC which was already on a losing run since November 2021 shedding further value.

Other cryptos irrespective of market size or token value reported crashes with only a few exceptions.

As explained, TerraUSD needed another cryptocurrency to peg on in order to “always” maintain its value close to the US dollar. In this case, Terra said that their algorithm for UST will be based on Luna, another cryptocurrency. Note for the $18 billion worth of UST issued there is no corresponding sum of dollars in the bank anywhere around the globe.

Highs and lows of TerraUSD Dec 30 2020

$0.85

Jan 9 2021

$1.025 May 26 2021

$0.99

May 10 2022

$0.79

Source: Coindesk

In a possible defense for companies like Terraform, Arthur in the same blog said, “The fundamental issue with this class of stablecoins is that it requires a willing bank to hold the fiat assets that back the token. Not a single Satoshi or Wei of stablecoin transaction fees ends up in the pockets of a banker, but there is a cost to the bank to hold these vast sums of fiat assets. As we know, the destruction of the time value of money by central bankers completely shattered the lending business model of commercial banks — making it a curious policy for them to agree to hold billions of dollars for protocols that aim to disintermediate them, with no identifiable upside.”

Creation and redemption of the stablecoin Stablecoins are generally created, or

FEATURE STABLECOINS

“minted,” in exchange for fiat currency that an issuer receives from a user or third party. Many stablecoins claim or expect that the coin can be redeemed at par upon request, in order to maintain a stable value compared to fiat currency.

Stablecoins are frequently touted as being backed or supported by various reserve assets.

However, there are no rules for the composition of stablecoin reserve assets, and the information made publicly available about the issuer's reserve assets is inconsistent in terms of both content and frequency of release between stablecoin arrangements. Based on information available, stablecoins differ in the riskiness of their reserve assets, with some stablecoin arrangements reportedly holding virtually all reserve assets in insured depository institutions or US Treasury bills, while others

reportedly holding riskier reserve assets such as commercial paper, corporate and municipal bonds, and other digital assets.

In terms of who can bring a stablecoin to an issuer for redemption and whether there are any limits on the number of coins that can be redeemed, stablecoin redemption rights can also vary significantly. Some issuers are allowed to postpone redemption payments for seven days or even cancel redemptions at any moment under the terms of the agreement, causing significant ambiguity about the timing of redemptions.

The rise of altcoins It is to be noted that Luna like most other cryptocurrencies are free for trading at the exchange. So how would Terra possibly maintain its promise of UST equalling a dollar? In theory, it was

possible, in case the price of Luna drops with respect to the dollar, then Terra would issue fresh tokens of Luna to match the price or do the exact opposite if the price drops.

But what happened, in reality, was far from the original idea that Terraform had sold its evangelists. A majority of the investors or those who held the tokens cashed out on their holdings of Luna and it soon became worthless. In turn, with the loss of value of Luna, those who held UST also lost their confidence in the altcoin and started selling off their Terra deposits triggering a death spiral.

The extent of the phenomenon can be understood by the following drop in price. Luna, whose token was worth $119 on May 4 was worth $0.000189 by the end of May 18. To keep up their promise, Terraform issued 6.5 trillion tokens to keep up with the slump in prices but that did not help the prices as there were no buyers of either Terra or Luna.

According to market observers, until this point in mid-May stable coins including altcoins had maintained their worth close to the US dollar by the margin of a few cents. But in mid-May, the range of stability veered from 95102% discounting for the crash of USDT. The last major wobble that was witnessed in this microsegment was in 2020 when Tether and USDC (not the same as USDT) had touched 97 cents and $1.01 once in 2021 for a brief period.

While the mid-May rout had wiped out Tether’s value by close to $8 billion, rival stable coin USDC has made substantial gains. The market value of the coin increased by $3 billion to reach a sum of $51 billion, noted Coinmarketcap. While part of these gains was the confidence enjoyed by USDC from traditional investment behemoths like BlackRock. editor@ifinancemag.com

International Finance | March - April 2022 | 41

BANKING & FINANCE

FEATURE INVESTMENTS

CRYPTOCURRENCY

There is a lot of buzz around Bitcoin, Ethereum, and altcoins.

But is there money to be made, or is it just another bubble

Are Cryptocurrencies still worth it?

IF CORRESPONDENT

42 | March - April 2022 | International Finance

FEATURE CRYPTOCURRENCY

L

ike the years preceding, you could get filthy rich investing in crypto in 2022. You could also lose everything you ever owned. Crypto coins are a high-risk, high-reward asset.

There are thousands of blockchain technologies competing, most will fail, some are scams, and a few will come out on top.

Everyone knows the explosive rise of Bitcoin since its inception in 2008. An asset worth $135 in 2013 rose to over $65,000 in 2021 before falling to $30,462 as of May 23, 2022. Ethereum also had a

meteoric rise to the second most valued crypto coin. From January 2021 to January 2022, the cryptocurrency market rose from $767 billion to $2.4 trillion.

In May, the recent market crash (crypto and stocks) has left investors wary of highrisk assets, but there are still many who are urging enthusiasts to buy the dip. So what should you do? Should you take advantage of the low prices, or is it too dangerous to enter the market now?

International Finance | March - April 2022 | 43

BANKING & FINANCE

FEATURE INVESTMENTS

CRYPTOCURRENCY

Cryptocurrency market share

Bitcoin

Are cryptocurrencies safe?

There are several risks involved, and there are many more reasons to believe that blockchain technology is here to stay.

Here is a list of risks associated with crypto coins: Though cryptocurrencies themselves are hackproof, their exchanges (crypto exchanges) are more prone to cyberattacks than stock markets.

There has been a long history of security breaches and humungous losses incurred by investors who had their assets stolen. Consequently, most exchanges and third-party insurers are offering hack protection.

Another issue is the storage of crypto coins. Prominent exchanges like Coinbase and Binance make buying and selling assets easy and offer in-exchange wallets, most people prefer to keep their investments in personal wallets, simply because they do not trust exchanges.

Many people store their coins in cold storage (offline hardware wallets). Most crypto-wallets come with a key, without which investors will permanently lose access to their assets. Cryptoenthusiasts often mistrust centralized exchanges because they never provide investors with complete asset control.

A government order could freeze your resources on an exchange, or they could go bankrupt, leaving you no means to recover your money.

Investors across the world are also worried about regulations. Global governments are polarised when it comes to crypto coins. China has banned financial & payment institutions from businesses related to cryptocurrency, and South Korea banned Initial Coin Offerings (ICO) in September 2021.

Whereas, El Salvador adopted Bitcoin as a legal ledger in 2021. It was a move that jeopardized their economy and

44 | March - April 2022 | International Finance

President Nayib Bukele's rule as bitcoin tanked last month.

Many governments are unsure of cryptocurrency taxation and shut down their use as a tender on the darknet and other black markets. In India, for example, cryptocurrencies have a 30% tax, but the ministry still has not declared them legal.

What is worse is that most coins on exchanges are termed 'crappy coins' or 'trash coins,' and they have no real value. These 'meme coins' are merely tokens with no real-world use. Shiba Inu and Elon Musk's favorite- Dogecoin are examples of crypto tokens popular among crypto day traders and shortterm investors. They are bought only to be sold again, quickly at a higher price. And have no long-term vision or technology to back them up. Despite this, Shiba Inu had grown by 1,296,236% since its inception.

Many altcoins (other than Bitcoin and Ethereum) often offer ICOs and exit the market immediately. The cryptocurrency world is wrought with scams, and if you do not read the whitepaper properly and follow the trends, your money could disappear overnight.

One such example is that of altcoins, TerraLuna and TerraUSD. These coins were partly responsible for the recent crypto crash, bringing down the behemoth Bitcoin by 25%. Luna lost 99.9% of its value in the crash of May 2022.

TerraUSD is a stablecoin designed to tether its value to the US dollar to reduce volatility. Do Kwon, the founder of Terra and Luna, is a trash-talking Stanford graduate who pumped up the prices of these coins with his showmanship.

Even big investing firms were investing in Luna, which went from little less than a dollar in 2021 to $116 per coin in April

44.38% 19.11% 4.11% Ethereum

BNB

Percentage of Americans with crypto assets

2018

7.95% 14.4% 23.16% 2019

2021

Crypto token sale by country

US

48% 12.78% 10.5% Singapore

UK

Source: Marketwatch

2022. Some big investors pulled out in time, but many lost millions. The twin coins lost a value of over $40 billion.

After the crash, even Changpeng Zhao, the CEO of one of the biggest exchanges, Binance tweeted, "poor again."

Like any other stocks or commodities

FEATURE CRYPTOCURRENCY

in the market, no currency or blockchain commodity comes without risks. Sure blockchain is the future, but how sure can you be that the coin you backed is the winning horse?

Finally, blockchain is just one among many competing technologies that can be used to make cryptocurrencies, NFTs, and other digital assets. Holochain, for example, is said to be much quicker, less data-consuming, and more eco-friendly than blockchain. Though it is still in its infancy, if the technology catches up to blockchain, it might become outdated and could be phased out.

Is there a silver lining?

All these dismal tidings and examples of horrible crashes should not dissuade you. Crypto remains one of the most lucrative commodities globally, and for every hundred 'meme coins,' there is an undervalued gem. Prospective coins include Cardano, Solano, Holochain, SingularityNet, etc.

The recent crash is certainly a worry for day traders and short-term investors.

But projects with real-world utility should continue to grow. Many celebrity investors have been silent on the recent crash. Hollywood celebs like Matt Damon and Curb Your Enthusiasm star, Larry David publicly endorsed crypto. Matt Damon recently even quoted the Crypto. com catchphrase, "Fortune favors the brave." However, his post-crash silence

has been criticized by the media.

Though the crash has slashed altcoin prices, these technologies are still in development and could make a comeback in the future. Cardano, for example, is one of the biggest cryptocurrencies by market cap and is designed as a scalable blockchain platform for running smart contracts. The project hopes to help develop decentralized finance apps, games, tokens, and the like. Though Cardano's decentralized exchange (dex), Sundaeswap, failed and lost 83.43% of Cardano's value from its all-time high, it is still considered a currency with immense potential.

Holochain or HOT is another project gaining traction in a bid to build web 3.0 (a decentralized internet). Despite its recent crash, the project has provided investors with a 100x gain in the last four years. Though dirt cheap at the moment, HOT is expected to hit $1 by 2030.

Crashes and booms are all part of the game. The stock market grew astronomically after the 2008 housing bubble collapse and market crash.

And the cryptocurrency markets are no different. There is still room for long-term investors, and the market is expected to bounce back.

Cryptocurrencies are a better alternative to other assets because transparency is a function of blockchain technology. The details of every transaction are encrypted and correct

many of the flaws of the traditional financial systems.

They are also deflationary assets.

The Federal Reserve has been printing billions of dollars every month to combat a sinking economy. All that printing is causing inflation or stagflation as we speak. However, the only way to make bitcoin is to mine it, which is a very energy-intensive process. There are only 21 million bitcoins, and no government can print more on a wimp.

Also, cryptocurrencies are global assets and are unrestrained by national or regional supply-chain, policy, and market forces. These assets can be held secretly and transferred across borders lightning fast. These attributes give cryptocurrencies an edge over fiat currencies. Finally, cryptocurrencies have the highest potential for high returns, and because the tech is still in development have some unseen longterm prospects.

Many investors think the recent crash is a good thing. Forbes magazine even reported that the price volatility will help create a healthier crypto market and that the crash will help better projects outshine "meme coins."

Experts also pointed out that every previous crash has led to operational improvements in the crypto ecosystem.

Crypto is here to stay. There will be other Bitcoins and Ethereums, and both coins are here to stay. Ethereum co-founder Buterin said he is not a billionaire after the recent crypto crash.

Dr. Merav Ozair, Professor of Fintech at Rutgers business school, said, "Blockchain technology is the future.

There is no escaping that. However, it is difficult to predict which projects will last and which will fail and be forgotten." editor@ifinancemag.com

International Finance | March - April 2022 | 45

BANKING & FINANCE

IN CONVERSATION

SHERIF SALEM CIO – PUBLIC MARKETS, CHIMERA CAPITAL

Chimera Capital announced in August that its Chimera S&P UAE Shariah ETF surpassed AED 100 million

"ETF in nascent stage in ME" SUNIL KUMAR SINGH Chimera Capital LLC, owned by Abu Dhabibased private investment firm Chimera Investment LLC, is licensed and regulated by the UAE’s Securities & Commodities Authority (SCA). Established in 2007, Chimera Investments LLC manages a diversified portfolio of listed and unlisted equities in both local and regional markets.

Since 2020, when the firm launched the first exchange-traded fund (ETF) tracking a Shariahcompliant index in the UAE, it has brought to the regional market various ETF products.

Most recently, in February this year, it launched its Chimera S&P Kuwait Shariah Compliant Exchange Traded Fund which tracks the performance of the S&P Kuwait Shariah Liquid 35/20 Capped Index.

Prior to that, in January this year, Chimera Capital LLC launched its Chimera S&P KSA Shariah Compliant Exchange Traded Fund, a physical, in-kind, liquid, and fully fungible ETF. The ETF has been designed to replicate the S&P Saudi Arabia Shariah Liquid Top 30 – 35/20 Capped Index. The index is provided by S&P Dow Jones Indices and tracks the performance of the top 30 most liquid Shariahcompliant equities listed on the Saudi Exchange.

Sherif Salem, Chief Investment Officer – Public Markets at Chimera Capital, talks about the exchange-traded funds (ETF) market in the Gulf Cooperation Council (GCC)/ Middle East and the challenges as well as opportunities for this particular asset class.

IF: Could you please give us an overview of the ETF market in the GCC and in the wider Middle East?

Sherif Salem: The ETF market in the Middle East is in a very nascent

46 | March - April 2022 | International Finance

PUBLIC MARKETS EXCHANGE TRADED FUNDS

stage. Currently, the AUM of ETFs listed in Middle East and North Africa (MENA) equity markets is approximately $475 million, and there are MENAfocused ETFs listed in US and UK markets with an AUM of $2.6 billion. That pales in comparison with the global $10 trillion ETF industry.

The number of ETFs based on MENA assets is also extremely small with only a few locally listed ETFs. There are currently thirteen ETFs listed on the MENA markets; six are listed in the UAE (all are Chimera ETFs), three in Saudi Arabia, two in Qatar, and one in Egypt making Chimera the largest issuer of ETFs in the region.

The number of ETFs based on GCC assets, including those domiciled outside the region, is abysmally low.

What are the reasons behind that?

There are few locally listed ETFs in the region due to the absence of sophisticated laws and regulations surrounding the ETF settlement cycle. The ETF industry is also a low-cost, low-margin business that many views as a heavy barrier to entry.

Compared to other developed and emerging markets,

The Chimera S&P UAE Shariah ETF launched with an AUM of AED2M ($545k), grew to

AED50M ($13.6M)

within six months, and at the end of April 2022 had reached

AED127.8M ($24.6M)

the awareness of ETFs and retail investor participation are also quite low in the GCC. Is it because regional investors do not have a targeted allocation to capital markets?

Yes, it’s true that is another reason; long-term institutional investors like pension funds, university endowments, and sovereign wealth funds, do not have a targeted allocation to regional equity markets.

But additionally, there is also a lack of regulations around authorized investment advisors, (e.g.

Outsourced Chief Investment Officer (OCIO) in the US), who advise clients on an optimal asset allocation to meet their investment needs. In Europe and the

International Finance | March - April 2022 | 47

BANKING & FINANCE

IN CONVERSATION

SHERIF SALEM CIO – PUBLIC MARKETS, CHIMERA CAPITAL

The regulatory structure in the UAE has evolved and developed a lot over the past few years. Specifically, the regulatory structure surrounding ETFs now is approaching the level of the more developed markets.

But the ETF ecosystem and regulations around it still have room to improve US, regulations are also used to control foreign fund flow into the country and enhance the local asset management regime.

Are you seeing an increasing appetite for ETFs among investors in the region? If so, which is the dominant class of investors showing greater participation in this asset class than others?

Appetite from High-Net-Worth Individual (HNWI) as well as local and GCC institutional investors has been gradually increasing for the Chimera ETFs, and local retail investors' engagement is slowly increasing.

Interest, locally and regionally, is also building momentum.

We expect it to continue improving in the coming period as retail and institutional investors become more comfortable with this innovative product and learn more about the benefits of an ETF.

What are the emerging trends you are seeing in the ETF asset class in the GCC? It is too early to talk about trends due to the nascent stage of the ETF industry in the Middle East. But we see that there are ample opportunities for further developing and expanding the ETF industry in the region.

How has been the performance of your ETFs so far?

We launched our first ETF in July 2020. The Chimera S&P UAE Shariah ETF launched with an AUM of AED2M ($545k), grew to AED50M ($13.6M) within six months, and at the end of April 2022 had reached AED127.8M ($24.6M).

In 2021, we launched the Chimera S&P UAE UCITS ETF, and most recently we launched the Chimera S&P KSA Shariah ETF (January 2022) and Chimera S&P Kuwait Shariah ETF (February 2022) –

48 | March - April 2022 | International Finance

total assets under management across the six ETFs is AED 450 million ($122.6 million).

More importantly, the trading volumes in the secondary have been increasing considerably. In 2020, the ETFs’ value traded in the secondary market was averaging AED 5.6 million per month.

In 2021, they averaged AED 18.6 million, and for the first four months of this year, they are averaging AED 41.4 million.

How do you see the regulatory structure and costs of ETF launch, listing, and distribution in the Middle East, compared to other markets?

The regulatory structure in the UAE has evolved and developed a lot over the past few years. Specifically, the regulatory structure surrounding ETFs now is approaching the level of the more developed markets.

But the ETF ecosystem and regulations around it still have room to improve.

The infancy stage of the fund industry in general in the Middle East makes fees higher relative to the more developed markets, due to the lower size of AUM in the region.

Additionally, the regulatory environment, while more developed than before, is still challenging which causes time to market to take longer than in the more developed markets, thereby increasing costs further.

What do you consider to be important factors in attracting more regional as well as international asset managers toward the GCC ETF market?

ETFs are an investment tool that serves different types of local and regional asset managers, the longonly fund managers use ETFs for cash management purposes and the hedge funds use them for hedging purposes. As the size, liquidity, and variety of ETF offerings increase, the interest will grow.

What kinds of investors have you been targeting for your ETFs? We are seeing increased appetite from HNWI as well as local and GCC institutional investors for the Chimera ETFs, while local retail investors have been slowly getting involved. Interest, locally and regionally, is slowly building momentum. We expect it to continue improving in the coming period as retail

PUBLIC MARKETS EXCHANGE TRADED FUNDS

and institutional investors become more comfortable with this new and innovative product and learn more about the benefits of an ETF.

How do you view the environment for fundraising over the coming 12 months?

When our first ETF was launched in July 2020, the fund closed with AED 2 million in AUM. As of the end of May 2022, across 6 ETFs there are AED 450 million assets under management. So, we have seen tremendous uptake from investors. Additionally, in the secondary market, where investors can buy and sell the ETFs in the stock market, activity has been steadily increasing. In May 2022, The Chimera ETFs traded a total of AED 62.7 million in the secondary market, the second-highest total this year and the third-highest since the launch of Chimera’s first ETF in July 2020. Large trading volumes for the month of May boosted the total traded value across Chimera’s six listed ETFs during the first five months of the year to AED 259.6 million, surpassing the AED 223.2 million that was traded during all of 2021.

Let us take a deeper dive into the Chimera S&P UAE UCITS ETF that had declared dividends very recently. How is it different from other UCITS ETFs in the marketplace? What type of an investor should use this ETF, and when should the investor use this ETF in his or her portfolio?

Currently, there are no UCITS ETFs in the regional stock markets. The UCITS product complements the shariah ETFs, providing investors with different investment tools to meet their investment needs and preferences. Moreover, both the UAE Shariah and UAE UCITS ETFs offer both dividend-paying share classes and accumulating share classes, which is a first in the region.

The physical-in-kind ETF, the first of its kind in the UAE and MENA provides all types of investors with an investment tool to access an index and diversify their equity investment exposures.

In the past, for the retail investor, investing in UAE stock markets meant buying single stocks, but now an investor can buy an index.

ETFs, provide investors with a liquid and costeffective investment tool that offers balanced and

In May 2022, The Chimera ETFs traded a total of AED 62.7 million in the secondary market, the second-highest total this year and the third-highest since the launch of Chimera’s first ETF in July 2020

diversified exposure to UAE-listed stocks through a single trade. Like stocks, investors can track the price of the ETF through its iNAV (indicative net asset value) on the ADX and DFM during the trading day, and the ETF’s holdings are published daily on the Chimera website.

For institutional investors, there is the added benefit of ETFs providing an instrument for liquidity management to deploy cash surplus to take advantage of short-term market movements, interim beta to maintain market exposure while refining a longterm view for their overall portfolio, and portfolio completion to fill gaps in a carefully selected core equity portfolio to take advantage of a broad market movement that may include stocks that may not have a fundamental story.

ETFs are also the perfect investment product for monthly contribution plans, such as savings plan investment by enabling any investor to buy units of an ETF through a disciplined approach by investing fixed investment amounts regularly each month. It allows you to accumulate a portfolio at a potentially reduced cost, without the need to start with huge initial capital.

While ETFs can be easily traded on the secondary market, where two liquidity providers ensure that there is ample liquidity on the bid and offer, and the spread is trading closely around the iNAV, ETFs can also be traded in the primary market.

If there is not ample demand or supply in the secondary market, an authorized participant can create or redeem units to satisfy investors’ orders.

In summary, ETFs are a highly regulated product, providing all types of investors an investment tool to easily access the market quickly and efficiently. editor@ifinancemag.com

International Finance | March - April 2022 | 49

Business Dossier - Japanese Securities Finance Co

Japan Securities Finance Co wins awards for innovative products Over the past couple of years, the company has achieved significant growth in securities finance with broadened product and services offering

J

apan Securities Finance Co., Ltd. won awards for 'Most Innovative Financing Company' and 'Most Innovative Securities Lending Service Provider.' The 95-year-old Tokyo-based securities company deals in loans for margin transactions, bond financing & general loans, bond services, and Stock lending. It is closely associated with Japan Exchange Group.

We interviewed Yutaka Okada, JSF's Senior Managing Executive Officer, asking about his firm's vision.

Okada speaks of expansion into Asian markets like Hong Kong, Korea, Thailand, and Indonesia; and talks briefly about the future of the securities industry and its projections in the West and Japan. JSF is also experimenting with blockchain technology in partnership with professors at Tokyo university to improve the securities industry. The Managing Executive also informed us about JSF's state-of-the-art data gathering techniques and analyses published in JSF Prime Index.

JSF is a unique financial institution in Japan, focusing primarily on the securities finance business sector. Could you explain more about your business model?

Established in 1950, JSF is a financial institution 50 | March - April 2022 | International Finance

specializing in securities finance. If you include our predecessor Tokabu Daiko Co., Ltd., we have been in this business for 95 years.

Unlike other financial institutions in Japan, JSF has been approved and supervised by the Financial Services Agency as a securities finance company under the Japanese Financial Instruments and Exchange Act. Since its establishment, JSF has been a pivotal force in Japanese financial markets by providing the infrastructure for securities finance. The firm also deals with margin loans for equities and securities lending/borrowing transactions.

As for the standardized equity margin loans, JSF has become a sort of last resort to provide cash and equity liquidity based on the institutionalized relationship with the Bank of Japan and the Japan Exchange Group, a role exclusive to JSF. Including the standardized margin loans, JSF’s business is conducted on a securities-backed basis in principle and managed within the Risk Appetite Framework.

Against this background, JSF has maintained high S&P credit ratings such as long-term A and short-term A-1.

As many global banks, broker-dealers and investors are recently participating in Japanese financial markets, our business with these players is also growing.

You mentioned that JSF increased transactions with overseas clients. Please explain the nature of these transactions?

As explained above, JSF has long been focused on Japanese markets. However, with the awareness that JSF is a player in Asian markets, we have recently begun to handle Asian equities repo transactions, in places like Taiwan, Hong Kong, and Korea, which allows us to contribute to the development of Asian markets by using triparty services.

Due to the increasing demand for government bonds as collateral for various financial regulations, we are also expanding repo transactions related to JGB and other government bonds where JSF is the lender.

It is well known that Japanese institutional investors and regional banks have a sizable amount of government bonds in their portfolios. With our high credit ratings and neutrality (We do not belong to any other Japanese major financial groups), JSF has maintained excellent relationships with these organizations. Therefore, JSF can effortlessly respond to the demands of overseas investors by working as an intermediary to provide access to their portfolios.

Also, from the viewpoint of balance sheet control, major financial institutions recently prefer synthetic trading to physical repo trades. So, JSF has also started handling these synthetics.

Q Please tell us if there are any other initiatives unique to your company.

As I just explained, JSF has a very long history, and the margin loan market, in particular, has been run by JSF alone.

Our company has a large volume of transaction data.

Individual investors have played a crucial role in the Japanese stock market, and many of them use margin loan transactions. We have conducted research into the behavior

Professor Kato is well known for creating many indices in Japanese markets and has helped us find that the margin loan was one of the major factors driving the Japanese market of these individual investors by analyzing our margin loan data in collaboration with Professor Yasuyuki Kato of Kyoto University and the Deutsche Börse Group.

Professor Kato is well known for creating many indices in Japanese markets and has helped us find that the margin loan was one of the major factors driving the Japanese market. Since we believed this factor would be essential information for investors, JSF began publishing it as the JSF Prime Index in 2020.

In addition, as this Index outperformed TOPIX, we launched a self-managed fund to build a track record for launching other investment products.

The recent progress in financial DX has been remarkable, and we believe that blockchain technology and digital tokens are areas worth venturing into for the securities finance industry. Digital tokenization of securities and blockchain technology makes the transfer of both collateral and securities more effective.

Simultaneous delivery of securities and collateral will decrease settlement risk in cross-border transactions. Keeping this in mind, JSF has started a demonstration experiment collaborating with Associate Professor Kenji Tanaka of the University of Tokyo, which is already showing excellent progress in electricity exchange using blockchain technology.

Please tell us about your future strategy as a specialized securities finance company.

Based on the experience, know-how, credibility, and neutrality we have cultivated as the only licensed and specialized securities finance company, JSF plans to work on the following points.

We will develop the global securities

finance business by expanding the range of security, cash for collateral, and counterparties from Japanese markets to US and European markets. With the rise in synthetic transactions, JSF is also considering moving into the derivatives markets. JSF would like to commit more to Asian and Middle Eastern markets, which show potential.

While initiatives for sustainable finance are becoming vital in the space of the securities finance business, JSF would like to contribute to sustainability by collaborating with startups in this area. And also, in middle and back-office support like fund administration which we newly launched.

As we explained above, blockchain technology has good prospects for collateral trading - an area of interest for securities finance. So JSF has already set up a demonstration experiment to explore this technology, and we are considering implementation in the future.

About the data business, JSF expects to develop our asset management business by using our JSF Prime Index. The data maintained by JSF is categorized as alternative data, so we are now planning to provide the original data to overseas entities by collaborating with a global data company.

The Japanese margin loan finance system that JSF has long been responsible for is an excellent system to apply to emerging markets where the securities market is growing. JSF has already provided the know-how to China, Korea, and Thailand to establish these markets.

Recently, we supported the set up of the securities finance company in Indonesia, PT Pendanaan Efek Indonesia, and thus holds ten stakes together with the Indonesian stock exchange group. We wish to maintain a good relationship with them for further collaboration in Asian markets.

JSF expects to develop the global securities finance business and contribute to the finance industry by implementing these projects.

International Finance | March - April 2022 | 51

INDUSTRY

FEATURE LOGISTICS

PRODUCTIVITY HYBRID WORK

Industry experts forecast a decline in bank deposits in the coming weeks due to interest rate hikes by the Fed

52 | March - April 2022 | International Finance

FEATURE FEDERAL RESERVE

US bank deposits expected to shrink IF CORRESPONDENT

B

anks in the United States have brought in increasing deposits year after year since World War II, but this might be the year to break the streak.

Bank analysts are consistently downgrading expectations for deposit levels at industry-leading firms for the last two months. The KBW Nasdaq Bank Index benchmark comprising 24 banks is forecasted to see a 6% deposit decline in 2022. The Federal Deposit Insurance Corp said that these 24 institutions make up nearly 60% of $19 trillion in deposits in December.

The pandemic was a wake-up call and stimulated the people's need to save for a rainy day. Bank deposits rose sharply as a result. A forecast of declining bank deposits would have been unimaginable a few months ago.

In February, analysts predicted a 3% increase in deposits. In May, they cut a trillion dollars from their former estimates. The sudden change indicates the impact of the Federal Reserve's hikes in interest rates on the finance sector.

Economists and Fed officials are calling for further sharp increases in interest rates to combat inflation. The news is rippling through the banking industry in myriad erratic ways. Consumer and business behavior is being observed to understand the consequences of the Fed's fiscal policy.

International Finance | March - April 2022 | 53

BANKING AND FINANCE

FEATURE BANKING

JP Morgan Chase & Co., Chief Executive Jamie Dimon said in his annual shareholder letter last week that this is not a traditional Fed tightening. He added that there are no models or precedents that could give us a remotely accurate answer.

However, a decline isn't harmful to banks.

Most banks can't process all the deposits coming their way. Many are reaching their regulatory limits on capital and are turning down depositors because they can't put their money to work.

The banking industry in the United States has $8.5 trillion more in deposits than in loans, revealed Barclay analysts. Even though demand for loans is bound to increase and deposits are necessary to sustain growing loan demand, banks have enough capital to keep lending without opening new accounts.

Barclay analyst Jason Goldberg said banks were sitting on deposits they don't even need.

The bad news is already here as bank stocks drop in value with the changing Fed policy. The S&P 500 fell at the beginning of the year, though the KBW Index started the year heading higher. However, the index has lost almost 20% of its value since midJanuary. They have lost 10% for the year, with S&P 500 losing 6%.

Banks cheer rising interest rates Even a slight increase in the benchmark rate would potentially give banks billions of dollars in revenue. And despite all their recent losses, large banks have been pressuring the Federal Reserve to increase interest rates for a while now, and they are finally getting their wish fulfilled.

When Federal Reserve officials said they intended to hike interest rates at least three times next year to combat inflation, big banks were paying close attention. The Fed's announcement wasn't expected so quickly, signally a weak economy.

Banks can earn revenue when Federal interest rates are hiked because they can

54 | March - April 2022 | International Finance

FEDERAL RESERVE INFLATION

US Banks Total Deposits (in trillions) 2021 2020 2019

19.70T 17.82T 14.54T

US Bank Loans (in Billions) 2022 2021 2020

16,098 15,430 14,856

Source: World Bank

charge more on loans but are not required to pay depositors more. Big banks are sleeping on giant amounts of cash that aren't working for anyone. Many bankers plan to utilize this untapped asset in securities as soon as the interest rates rise. Trading windfalls during the pandemic that helped banks grow are slowing down, and experts forecast incremental expenses for technological and expansionist plans. A banking analyst at Autonomous Research, John McDonald, said that interest rates could be the tiebreaker, as banks are very rate sensitive.

Wells Fargo Co. and Bank of America Corp. are more susceptible to change as they have the most US deposits. They are both estimated to gain around $7 billion in annual revenue if there was a single percentage point jump in both short and long-term rates simultaneously.

JPMorgan Chase & Co., which had $52 billion in net interest revenue in the past financial

year, would gain $6.7 billion in revenue with a single-point interest rate hike.

McDonald said that Wall Street's expected annual earnings per share for large banks would average 19% more if this hypothetical interest rate kicks in. He added that Wells Fargo's earnings would be around 38% more.

Bank profits rise when they collect interest on borrowers more than they pay returns to depositors. Fed interests justify higher interest rates on loans, and banks generally don't hike interest rates on deposits.

When the Fed increased interest rates the last time, which was in 2015, industrywide income grew by 9% approximately for three consecutive years, according to Barclay analysts. Depositors did not complain much about the stagnant returns, and Banks performed exceptionally well.

The same patterns are expected to repeat as big banks have excess deposits and can afford to be miserly. Bank of America Chief Executive officer Brian Moynihan stated that from 2015 to 2018, the Fed normalized rates, but the banks didn't raise interest rates on deposits. The current hike is seen as another opportunity where banks will increase interest rates on borrowers but not on depositors. Interest rates on loans are quickly hiked, and post-crisis regulations will make banks hold more short-term loans, which are swiftly repriced to the higher interest rates.

For example, banks have very few 30-year mortgages and instead focus on commercial and auto loans lasting just a few years. Shortterm lending is on the rise, and banks are making a killing.

Nothing is certain However, many investors worry that opening the floodgates into short-term markets might be a sign of unrest ahead. Banks, market funds, and other investors have put a trillion dollars in spare cash in reverse and repo markets overnight. The move has led many to speculate that tough times lie ahead. Many

FEATURE HYBRID WORK

have attributed this overnight move to the Central Bank's decision in June to increase the interest it pays to 0.5% from 0%.

Repos, or repurchase agreements, are the main market mechanism that moves cash from lenders to borrowers. The Federal Reserve uses repos to sway short-term interest rates. Banks had rushed to the Fed during the pandemic for repos.

Not many investors believe that the repo and reverse repo markets are under immediate threat of a breakdown on par with the 2008 crisis. However, current economic developments and the sensitivity of such policy changes have many portfolio managers on the edge. Traders report that repo is the number one market they track to measure short-term bond markets.

Increased rates don't necessarily mean more profits as they can depress mortgage lending. The Fed's take on the economy is just as significant as interest rates. JP Morgan CEO Jamie Dimon remarked that the why is more important than the numbers.

A relief rally Tech and financial stocks have been freefalling for the last quarter. The interest rate hike is expected to stimulate growth, at least with banks.

On May 24, the market rallied as stocks climbed and bonds declined after President Joe Biden signaled he was willing to reconsider China tariffs imposed during the Trump administration. Dimon even said that it is possible for the stormy clouds over the US economy to dissipate soon. The Euro climbed after European Bank Chief Christine Lagarde said higher interest rates are coming in July.

The rally on May 24 came as a respite to investors who lost day after day for months.

Tech stocks like Apple and Microsoft jumped and JPMorgan stocks surged by 6%.

On Friday, S&P 500 was at 19% below its record closing high on January 3. It's believed that if the benchmark index closed at 20% or

Market share of leading banks in the United States in 2021, by the value of domestic deposits JP Morgan & Co

11.81% Bank of America

11.11% Wells Fargo

8.25% Source: World Bank

below, it would be a confirmation of a bear market.

The markets gained, and there was less worry about inflation and the war in Ukraine.

Chuck Carlson, Chief Executive Officer at Horizon Investment Services in Hammond, Indiana, said after the rally, that the market was less fearful about inflation and more confident about the Fed's capacity to orchestrate a soft landing. He however added that the bias is still to the downside.

Fed's release on April 11 after its latest policy meeting will give economists and traders indicators of the coming weeks and whether peak inflation in March reduced consumer spending power.

Despite the market’s newfound optimism, Oliver Porsche, the Senior Vice President at Wealthspire Advisors, in New York said that it feels like a relief rally more than a fundamental change in investor sentiments.

from the year prior as banks set aside massive amounts to guard against potential losses, but the industry showed signs of strengthening in the fourth quarter as the economy begins to recover from the COVID-19 pandemic, according to the Federal Deposit Insurance Corporation (FDIC). The industry posted $147.9bn in profits in 2020, a sharp decline from record 2019 profits.

However, bank profits were up 10% in the fourth quarter to $59.9bn compared to a year prior as firms shrank how much cash they set aside to guard against losses. FDIC Chairman Jelena McWilliams said the new data shows that banks proved their resilience amid the pandemic despite falling profits. She also said that the banking industry maintains strong capital and liquidity levels, which can mitigate potential future losses.

The new data shows the wild swings the banking industry went through in 2020, as firms scrambled to set aside billions of dollars to guard against the economic toll of the pandemic, only to begin digging out from those losses in the second half of the year.

The profit growth posted by banks in the fourth quarter was primarily due to shrinking reserves against potential losses. The FDIC said so-called provision losses fell by 76% at the end of 2020 compared with the end of 2019 to $11.4bn, the lowest level since 1995. The regulator noted a looming challenge for banks is the persistent low-rate environment. The regulator also noted that the bank's interest income shrank for five straight quarters..

US bank profit falls by 37% United States bank profits fell 37% in 2021

editor@ifinancemag.com

International Finance | March - April 2022 | 55

ECONOMY

ANALYSIS

FOOD PRICES RUSSIA-UKRAINE WAR

Cooking oil wholesale price has been projected to increase by 30% in 2022

Soaring food prices are destabilizing countries IF CORRESPONDENT

When people took to the streets in Egypt in 2011, they chanted about freedom and social justice, but also about bread. The cost of pantry staples had jumped because of the soaring prices of goods like wheat, stoking anger with President Hosni Mubarak.

More than a decade after the Arab Spring, global food At a time prices are surging again. when labor The food prices have already expenses are reached their highest level on rising, Russiarecord in early 2022, when Ukraine the COVID-19 pandemic, war and bad weather, and climate the COVID crisis upended agriculture pandemic put and jeopardized millions of significant people's food security. pressure on Also, Russia's war in operator Ukraine had made the margins situation much worse by triggering a spike in the cost of the other daily necessity like fuel. It has also impacted the food supply chain. The higher labor cost, factory closures, and workforce shortages also drive up production and transportation expenses.

According to industry experts, cooking oil wholesale costs have skyrocketed, with up to a 30% increase projected in 2022. Other commodity expenses, such as dairy, fruit, and vegetables, are likely to rise as well.

At a time when labor expenses are rising,

56 | March - April 2022 | International Finance

experts believe that the Russia-Ukraine war and the COVID pandemic put significant pressure on operator margins.

Rabah Arezki a Chief Economist of the World Bank's Middle East and North Africa Region and a Senior Fellow at Harvard's Kennedy School of Government said rising food prices are extremely worrisome.

He also said that this could generate a wave of political instability, as people who were already frustrated with government leaders are pushed over the edge by rising costs.

The highlighted concerns by Arezki had come true as the world witnessed the recent unrest in Sri Lanka, Pakistan, and Peru.

In Sri Lanka, protests have erupted over gas and other basic necessities shortages. In Pakistan, doubledigit inflation has weakened Prime Minister Imran Khan's support, pushing him to resign. In recent antigovernment rallies in Peru, at least six people have died as a result of increased food costs. The political strife is unlikely to be limited to these countries.

Hamish Kinnear, the Middle East and North Africa analyst at Verisk Maplecroft, a global risk consultancy said that the people have not yet felt the full impact of rising food prices and that the world has to see much more.

Lessons from the Arab Spring Food prices were skyrocketing in the run-up to the

Arab Spring, which began in Tunisia in late 2010 and extended across the Middle East and North Africa in 2011.

The Food and Agriculture Organization's (FAO) Food Price Index reached 106.7 in 2010 and surged to 131.9 in 2011, setting a new high.

An Emirati commentator stated in January 2011, referring to the Tunisian street vendor Mohamed Bouazizi whose protest act sparked the Arab Spring said that Bouazizi did not set himself on fire because he could not vote but because he cannot watch his loved ones wither away slowly, not from grief, but from cold starvation.

Circumstances in individual countries differed, but the overall picture was obvious. The problem was exacerbated by rising wheat prices. And the food price issue has gotten significantly worse since then.

Global food costs have recently reached a new high. In March, the FAO Food Price Index reached 159.3, up nearly 13% from February. The conflict in Ukraine, a major exporter of wheat, corn, and vegetable oils, as well as tough sanctions on Russia--a major producer of wheat and fertilizer---are projected to drive up prices in the coming months.

Gilbert Houngbo, head of the International Fund for Agricultural Development, said in April

that 40% of wheat and corn exports from Ukraine go to the Middle East and Africa, which are already grappling with hunger issues, and where further food shortages or price increases could stoke social unrest.

The rise in energy prices is exacerbating the problem. Oil prices around the world are about 60% higher than they were in 2021. Coal and natural gas prices have also risen.

Many governments are struggling to protect their citizens, but the most vulnerable economies are those that borrowed excessively to get through the 2008 financial crisis and the COVID pandemic.

Arezki remarked that maintaining food and fuel subsidies will be tough as development slows, weakening their currencies and making debt payments more difficult, especially if prices continue to rise.

He said that the countries are indebted. They do not have buffers to deal with the tensions that will arise as a result of such high pricing. According to World Bank, about 60% of the world's poorest countries were already in debt trouble or in significant danger of it.

Where tensions are simmering Asia: In Sri Lanka, an island nation of 22 million, an economic and political crisis has already erupted, with demonstrators taking to the streets in defiance

International Finance | March - April 2022 | 57

ECONOMY

ANALYSIS

FOOD PRICES RUSSIA-UKRAINE WAR

US food price outlook for 2021-2022

Beef and veal of curfews and government officials resigning en masse.

Sri Lanka was forced to deplete its foreign currency reserves as a result of high debt levels and a weak economy reliant on tourism.

This prevented the government from paying for essential imports like energy, resulting in severe shortages and forcing citizens to queue for hours for gasoline.

In order to try to secure a bailout from the International Monetary Fund, its officials have also devalued the Sri Lankan rupee. However, this step has just increased the country's inflation. In January, it hit 14%, nearly double the rate of price rises in the United States.

Meanwhile, on April 9, Pakistan's parliament passed a vote of no confidence against Prime Minister Imran Khan, ousting him from power and upending his government. While his political issues date back years, claims of economic mismanagement as the cost of food and fuel leaped, as well as the depletion of foreign exchange reserves which made matters worse.

The Middle East and Africa: Experts are also looking for signs of political unrest in other Middle Eastern countries that rely largely on food imports from the Black Sea region and frequently grant generous public subsidies.

Between 70% and 80% of imported wheat in Lebanon originates from Russia and Ukraine, where roughly three-quarters of the population was living in poverty last year as a result of political and economic collapse. The Beirut port explosion in 2020 also destroyed important grain storage.

58 | March - April 2022 | International Finance

Pork Fresh fruits and vegetables Fish and seafood Dairy products Fats and oils Sugar and sweets Cereals and bakery products

+16.2% +14% +7.7% +10.4% +5.2% +11.7% +7% +7.8%

Source: FAO

Egypt, the world's top buyer of wheat, is already feeling the strain of its massive bread subsidy scheme.

After price spikes, the country has set a fixed price for unsubsidized bread and is attempting to secure wheat imports from India and Argentina instead.

With an estimated 70% of the world's poor living in Africa, Arezki believes that the continent will be extremely susceptible to rising food and energy prices.

According to the International Committee of the Red Cross, droughts and violence in Ethiopia, Somalia, South Sudan, and Burkina Faso have created a food security crisis for more than a quarter of the continent's population. It went on to say that the situation could worse in the coming months.

Political unrest has already begun to spread across the continent.

Since the beginning of 2021, a succession of coups has occurred across West and Central Africa.

Europe: Even more developed economies, which have greater buffers to shield citizens from

painful price increases, won't have the tools to fully cushion the blow.

Thousands of demonstrators gathered in cities across Greece to demand higher pay to combat inflation.

While France's presidential election is narrowing as far-right contender Marine Le Pen plays up her plan to reduce the cost of living.

In April, President Emmanuel Macron's government announced that it was considering giving food coupons to help middle- and lowincome families eat.

Grocery prices impacts the United States According to the United States Department of Agriculture (USDA), grocery prices are expected to rise between 3% and 4% in the coming months. And that's on top of all the other increases consumers faced over the past several months.

USDA said no food category will see a price decrease in 2023. All food categories, including meats, poultry, eggs, dairy products, fats and oils, and more, were amended upward by the USDA. Fresh veggies were the

only category where the USDA made a reduction.

The most significant increase was in beef and veal, while the smallest was in fresh vegetables.

In 2023, wholesale beef prices are expected to rise between 4% and 7%. Contributing to the higher retail poultry and egg prices, the report said, is avian influenza. Poultry prices are expected to rise by 6% to 7%, while egg prices are expected to rise by 2% to 3%.

According to a report, an ongoing outbreak of highly pathogenic avian influenza could contribute to poultry and egg price increases through reduced supply or decreased prices through lowered international demand for US poultry products or eggs.

Retail prices for dairy goods are rising due to high demand. The USDA forecasts a 4% to 5% growth in dairy production in 2022. The invasion of Ukraine by Russia and interest rate hikes by the Federal Reserve are also exerting downward pressure on food prices.

The report said that the impacts of the conflict in Ukraine and the

recent increases in interest rates by the Federal Reserve are expected to put upward and downward pressures on food prices, respectively. The situations will be closely monitored to assess the net impacts of these concurrent events on food prices as they unfold.

According to February's US Consumer Price Index, released in March, the inflation came in at 8% for the last 12 months — the highest yearover-year increase since April 1981.

United Nation's food price prediction United Nations' Food Price Index, which tracks monthly changes in international prices, averaged 125.7 points — a 28% increase over 2021.

FAO Senior Economist Abdolreza Abbassian explained that, normally, high prices are expected to ease as production increases to match demand. This time, however, the consistently high cost of inputs, the ongoing global pandemic, and ever more volatile climatic conditions “leaves little room for optimism about a return to more stable market conditions even

in 2022", he said.

At the end of 2021, world food prices fell slightly, as international prices for vegetable oils and sugar fell significantly, the data shows.

The Food Price Index averaged 133.7 points, a 0.9% decline from November, but was still up 23% from the same month the year before.

Only dairy posted a rise that month.

The Cereal Price Index also decreased 0.6%, for the full year, however, it reached its highest annual level since 2012, rising 27%.

The biggest gainers were maize, up 44%, and wheat, gaining 31%. One of the world’s other key staple foods, rice, lost 4%.

The Vegetable Oil Price Index declined 3 percent in December, possibly due to concerns about the impact of increased COVID-19 cases, which have caused supply chain delays. The Oil Index hit a new high for the year, up 66% from 2020. Sugar, another important commodity, fell 3% last month from November 2021 to a five-month low.

editor@ifinancemag.com

International Finance | March - April 2022 | 59

Business Dossier - Ahli United Bank

Ahli United Bank over the years has strived to incorporate global industry best practices in its functioning

Ahli United Bank of Kuwait bags two accolades

A

hli United Bank of Kuwait was accorded two awards at the International Finance Awards 2021 held in Dubai on March 25.

Incidentally, the annual award ceremony organized by the International Finance Magazine reached its 10th edition this year in 2022.

Like every year, industry leaders from across the world were felicitated for their unmatched leadership and sector expertise after being identified by a dedicated pool of industry observers and researchers.

One of the award categories in which the bank emerged as a winner was IT Innovation.

Abdullah Jaragh, General ManagerInformation Technology for the bank bagged the award for his pivotal role in navigating the bank through the COVID-19 pandemic and its resultant hurdles. AUB had to face an overnight increase in demand for digital services and products. This swift turnaround by the bank helped it retain the confidence of its customer base.

Even before the pandemic, the bank had

60 | March - April 2022 | International Finance

been focused on increasing its digital products and services portfolio. Not stopping at that, the bank under the IT leadership of Jaragh has not been shy to deploy emerging technologies like robotics for its service delivery. According to Jaragh, IT is an enabler to better serve the customers and scale innovation.

Under his leadership, the bank has always strived to enhance its customer experience and add value to its services. Not being reluctant about their progress, the IT team is constantly upgrading their core competencies and staying aware of new technologies.

The IT department is composed of a small number of individuals with varied expertise.

The bank has also made adequate investments for all

the necessary IT infrastructure to remain future-ready and has given thrust to security as well. The bank conducts thorough training programs for the entire staff on a regular basis to ensure that the bank does not fall prey to phishing attacks or any other forms of cyberattacks.

As an IT leader, Jaragh showed imagination in leadership and showcased a long-term vision to ensure that the bank’s human resources were up to face the challenges of the day. His leadership in addressing adverse conditions due to the impact of the pandemic helped the bank tide over the sudden crisis and increased demand. He was also able to provide the necessary information infrastructure to support the bank on its path to providing digital services and products in addition to its traditional services.

However, this achievement did not come as a surprise to his colleagues at the AUB. Abdullah boasts of a stellar career in the IT domain with experience spanning just short of four decades. Since his appointment in the bank, he has strived to work on business agility and elevate the operational resilience potential of the firm. He has worked consistently to keep the cost of IT investments at the minimum while delivering an optimal level of resource efficiency.

The other award for the bank came under the Best Liquidity Management Bank – Kuwait 2021 category. Abdullah AlLangawy, the bank’s General Manager-Treasury received the award for his role. AlLangawy has been instrumental in ensuring that the bank remains healthy liquidity depending on the market dynamics and macroeconomic conditions. The assets and liabilities committee has remained ductile through turbulent times and managed to maintain adequate liquidity. At the same time, the bank’s treasury team has ensured that the bottomline is not affected and confidence of the customer is never compromised.

Recently, Fitch Ratings gave the bank an ‘A’ rating with a stable outlook as part of its Long-Term Issuer Default Rating (IDR) amid the current global financial uncertainty.

The bank also recorded a net profit for 2021 amounting to KD 31.2 million, which is higher by 5.1% than KD 29.7 million in 2020. Fitch noted that AUBK's profitability metrics continue to recover, supported by a mild rebound in the bank's operating profit.

The rating agency noted that these will be supported by improved operating conditions and higher profit rates in 2022.

This was possible because the bank had managed to achieve the lowest cost of funds in the market.

AlLangawy brings more than 16 years of prime banking experience including that in assets and liabilities management, investments and treasury sales, and derivative desks. Other than his responsibilities at AUB, he also serves on the Board of Directors and is a member of the Audit Committee at MEFIC Capital based in the Kingdom of Saudi Arabia.

His enviable professional journey is preceded by an equally enviable academic journey. He has an MBA degree from Maastricht Business School of Management and has completed PLD (program for leadership development) from the prestigious Harvard Business School and the Certificate of Investment management analysis and Investment Strategies Program from Wharton University.

International Finance | March - April 2022 | 61

TECHNOLOGY

FEATURE BIG TECH

STOCK MARKET CRASH

Investors wary as Tech titans in troubled times Market capitalisation of cryptocurrency reached $2.65tn in 2021

IF CORRESPONDENT

"An entire generation of entrepreneurs & tech investors built their entire perspectives on valuation during the second half of a 13-year amazing bull market run," said Bill Gates in a tweet on May 1. He added, "The unlearning process could be painful, surprising, and unsettling to many. I anticipate denial."

The Microsoft founder is a pioneer in the IT industry. He is known for his visionary ideas and predictions, including that of a global pandemic. And this current prediction rings alarm bells for many investors and traders. Especially since another visionary tech billionaire Jeff Bezos retweeted Bill's tweet, adding, "Markets teach. The lessons can be painful."

When a little-known virus began to make headlines in early 2020, little could anyone guess that their lives would change forever. Most of the world's

62 | March - April 2022 | International Finance

FEATURE CRYPTOCURRENCY

retail went online. Streaming services dominated theatres, and everything was rapidly digitized, leading to an unprecedented boom in tech company valuations and growth.

Everything changed as the markets lost trillions in value in the recent weeks. At the end of the pandemicfuelled bull run, investors abandoned once-hot startups, and now even companies considered too big to fail are also feeling the brunt.

Apple lost $200bn, and its position as the most valued company in the world has been wrestled away

from it by oil producer ARAMCO. Most tech companies are declining, resulting in the Nasdaq composite falling over 13% in April- dropping more than 30% from a record high in 2021.

The worse hit was Meta, losing $230bn in market value last February after reports of the first-ever user decline in Facebook history.

Amazon also reported its first loss since 2015 last month. And Alphabet, though faring better than its peers, fell short on revenue as the YouTube and TikTok battle rages.

International Finance | March - April 2022 | 63

TECHNOLOGY

FEATURE BIG TECH

STOCK MARKET CRASH

Big tech companies not hiring Twitter and Meta announced in their internal memos that they would not be hiring due to expense guidance tabled in their earnings reports. Amazon believes that its warehouses are 'overstaffed,' but layoffs are not in discussion yet. However, they have been "working to remedy that."

Layoffs.fyi, a layoff tracking site reported that over double the tech firms in 2021 are laying off employees’ same time this year (from 25 to 55). The S&P 500, considered widely the benchmark for US stock market performance, declined 13% in April. It was the steepest four-month drop to start any year since 1939.

However, it is not a general trend, as 431,000 jobs were added to the broader market in April. A senior analyst at Investing.com, Haris Anwar, said that the post-pandemic bullish sentiment is now being normalized. Pandemic superstar like Zoom, which was valued at more than 500% in one year, slumped down to pre-pandemic levels. Netflix, which added 36 million new users, lost more than half of its value by April 2022.

An analyst from digital transformation consultancy Publicis Sapient, Raj Shah, remarked that the revenues are down, costs are up, and tech companies will freeze hiring, reduce costs, and re-examine investments.

However, he was not too decisive on whether this hints at a tech bust.

The invisible hand Experts believe that the current tech crisis is not just about over-evaluation.

The Russian invasion of Ukraine has aggravated supply chain problems that resulted from the pandemic.

Meta's CEO Mark Zuckerberg, reportedly said that the war in Ukraine is not just a humanitarian crisis but also

64 | March - April 2022 | International Finance

an economic one.

Facebook was blocked in Russia, and the use of the network in Ukraine is limited because of the war. This has wiped out the revenue from Russian and Ukrainian ads on FB. President of Business Intelligence at GroupM, Brian Wieser, said that there is a palpable fear of the economic crisis that was catalyzed by the war and the prevailing issues of supply chain disruptions and inflation. Weiser also added that many investors are acting as if depression is inevitable.

The Chinese zero-COVID policy and strict lockdowns in important manufacturing centers like Shanghai are disrupting the global supply chain.

Cheap Chinese goods (especially hardware) are hard to import, and most of their labor remains unproductive due to severe lockdown measures. It is an issue for big tech, which uses China as

their manufacturing hub.

The Chinese economy is also suffering through a real-estate bubble burst marked by the collapse of industry giant Evergrande group. The pandemic lockdowns, trade wars with the US and Australia, Uighur humanitarian crisis, civil rights protests in Hong Kong, etc., have put China in a precarious situation.

Soaring gas prices due to sanctions and trade wars with Russia have increased fuel prices across the globe, exacerbating the current inflationary period. The US was at a 30-year high inflation rate of 8.3%. It is likely to have had an impact on e-commerce. Another major fear among investors is the Federal Reserve increasing interest rates higher to tackle inflation and pushing the economy into a recession.

Bad news from big banks In early April, the Deutsche bank

FEATURE CRYPTOCURRENCY

However, the job markets performed spectacularly well, with Moody's Analytics projecting that the unemployment rate will hit its lowest since the 1950s.

Deutsche Bank is the most bearish among big banks. Their peers like Goldman Sachs find the situation challenging but does not believe a recession is inevitable.

Chief investment officer of USB Global Wealth Management, Mark Haefele, said that inflation will ease and that the group does not expect a recession from the rising interest rates.

With polarizing positions taken up by industry giants, many investors and the market is in mild panic.

Crypto is dead?

became the first big bank to forecast a 'mild' US recession. They now predict an even worrisome outcome for the Federal Reserve's move to increase interest rates.

"We will get a major recession," Deutsche Bank economists wrote on April 26, within a month of their first forecast, in their forboding report ominously titled, "Why the coming recession will be worse than expected."

Deutsche Bank said that historically the Fed has not been able to control even minor inflation and unemployment without pushing the economy into a significant recession.

They created an index tracking the distance between inflation and unemployment for over six decades and the Fed's goals for those metrics.

They noted that the Fed is way behind the curve than in the early 1980s when inflation was extremely high.

Cryptocurrencies also nosedived this week. Bitcoin traded below $30,000 for the first time in a year. And more than $200bn was wiped off the broader market. Altcoins lost their value drastically, and the market was valued at around 1.38 trillion. Even Ether, Solano, and Cardano were down by double digits.

Some remarked on Twitter that crypto was dead. The recent pullout from the crypto markets has been partially attributed to the collapse of TerraUSD, a stable coin. Stable coins are supposed to be less volatile and are not expected to fail.

Even Macro-developments like inflation, the Federal reserve's increase in interest rates, and the war in Ukraine affect crypto markets.

Nischal Shetty, co-founder, and CEO of Wazirx said that crypto markets are mirroring traditional markets and are seeing a correction. He went on to say that crypto was in a bearish phase.

A coin of interest, Luna was ranked

230 on the cryptocurrency index and fell from $88 to $.00003872, a 99% fall from its stable value.

Tammy Da costa, Analyst at Daily Fx, remarked that the failures of TerraUSD and the poor earnings report of Coinbase led to the collapse. He also noted that there is fear of big companies and institutions withdrawing their funds from crypto portfolios.

Tammy also added that the Federal Reserve interest rates are reducing people's appetite for high-risk investments like Cryptocurrencies.

However, many cryptocurrency experts are still encouraging investors to buy the dip. Kumar Gaurav, founder, and CEO of Cashaa said that investors should take advantage of the dip as it is the perfect moment to invest. This is not the first time the crypto markets have suffered a massive loss.

Deceleration, not a decline Weiser was quick to point out that the tech companies are not failing and are merely seeing the deceleration of their explosive growth. He also added that a growth of 30% falling to 10 or less might be upsetting, but it is not a crash.

Another important point to note is that expectations of tighter fed policy increased dormant bond yields. The yield on the 10-year US treasury note has almost doubled for the first time since 2018. Higher bond yields dull the lure of tech and other high-growth companies.

Investors are cautiously optimistic and look to the consumer price index and S&P 500, which can hold clues to the state of the market in the coming weeks.

Big tech has not expressed any desire to downsize or lay off employees yet.

editor@ifinancemag.com

International Finance | March - April 2022 | 65

TECHNOLOGY

ANALYSIS

ELON MUSK TWITTER TAKEOVER

The billionaire's takeover of humankind's digital town square has polarised the world

Why is Elon Musk's Twitter bid so controversial?

IF CORRESPONDENT

Elon Musk, one of twitter's most controversial users, plans to take over the platform. He brokered a deal for $44 billion to buy the company, a story that had everyone from the White House to Wall Street clamoring.

The billion-dollar buyout is so controversial because Musk "Free speech is declared himself a champion the bedrock of of free speech. A move favored a functioning by free speech enthusiasts and democracy, extremists and criticized by and Twitter liberals and establishments. is the digital Many excluded from Twitter town square and mainstream media (the where matters alt-right and other right-wing vital to the groups) welcome the move future of hoping to find a space on the humanity are platform. The Left believes that debated" free speech often leads to hate speech, and a certain degree of censorship is crucial to maintaining stability.

Musk's stand has been clear. The techbillionaire once said, "Free speech is the bedrock of a functioning democracy, and Twitter is the digital town square where matters vital to the future of humanity are debated."

Musk has been a vocal critic of the platform, demanding the app "prioritizes societal" imperative of free speech and rolls back content moderation. He joined Twitter in 2009 and has even expressed in a

66 | March - April 2022 | International Finance

2017 tweet that he wanted to purchase the platform.

Elon has over 84 million followers on his account, with as many fans as there are critics.

Why does the tech billionaire want to take over Twitter?

Musk has been trying to exert his influence on Twitter for quite some time now. In April, he bought 9% of Twitter shares but backed out of his planned board seat at the last moment and decided to buy the whole company and privatize it. His bid was $43.4 billion, around $54.20 per share for the entire company. He did this right before an interview with TED. On April 15th, the company, in a press release, said they were adopting a limited-duration shareholder rights plan to stop the tech entrepreneur from taking over.

Why has this news rattled Wall Street?

Elon Musk is a respected industrialist and CEO of Tesla, SpaceX, The Boring Company, and Neurolink.

But his acquisition of Twitter has shock waves pulsing through Wall Street and social media.

Many believe that Musk is overpaying and Twitter isn't worth as much as he thinks. Wedbush analyst Dan Ives said that $44 billion is a headscratcher for a company that he thinks can't be worth more than $30 or $35 billion. However, he added that if you are the world's richest person, you can do something like that, and the move has had Twitter investors popping champagne.

Investors are worried about Musk's attempt to change Twitter's economic model, as he promised that he would not rely on advertisements for revenue.

Simultaneously, activists are afraid of one man having Twitter's colossal database at his disposal.

The deal is not complete and can still fall through.

Musk is pledging shares in Tesla and SpaceX to buy Twitter, and the ongoing market volatility is slashing millions in market cap from big tech. It means that he might not have the resources to purchase twitter if the bear market continues. Musk said he was waiting for some clarity about the global number of fake Twitter accounts and accused Twitter of having a lot of bots (fake users) than the corporation would admit. He called Twitter's bot numbers 'very suspicious.'

On May 23rd, Musk tweeted a poop emoji at the Twitter CEO after Agarwal wrote a long thread on bots and the company's efforts to control them. The next day, he said acquisition cannot progress until Twitter provides "proof of less than 5%." Some say this is Elon's strategy to drive down the agreed $54 per share takeover price as tech stocks, including Twitter, have lost so much value in the last few weeks.

Others like Analyst Dan Ives of Wedbush Securities said that Musk has "cold feet" and the "bot issue is a scapegoat to get out of the Twitter deal."

Elon's delay in the Twitter acquisition had many investors worried, and Tesla stocks have plunged. The CEO took to Twitter to inform shareholders that the Twitter acquisition took only about 5% of the time and that Tesla is on his mind twenty-four-seven.

Will the deal be successful?

Elon Musk put the $44 billion deal on "temporary hold" till he could ascertain whether bots make up fewer than 5% of the total user base. However, since Twitter has not been able to show Musk any proof or data about the number of fake users, he wrote to Twitter on June 6 that he reserves the right to terminate the deal. He accused Twitter of "resisting and thwarting" his requests for data on bots.

Twitter allegedly refused to provide the sought-after information, and Musk said that the social media giant's lax testing methods are inadequate and that he was conducting a personal analysis.

The Tesla CEO also remarked that Twitter violated his information rights by withholding data. His legal counsel added that this is a material breach of Twitter's obligation under the merger agreement. He also said Musk was entitled to withdraw from the transaction and cancel the merger agreement. The SpaceX CEO sent the letter a week after Twitter claimed the HSR

International Finance | March - April 2022 | 67

TECHNOLOGY

ANALYSIS

ELON MUSK TWITTER TAKEOVER

Act waiting period for the platform's acquisition was over.

General Ken Paxton, Texas Attorney, launched a probe on Twitter bots after Musk's allegations.

His office said in a statement that the Attorney issued a Civil Investigative Demand (CID) to investigate whether Twitter's reporting on the number of actual users was misleading or deceptive under the Texas Deceptive Trade Practices Act. It was Donald Trump who endorsed Paxton for the position of Attorney General. Paxton was indicted seven years ago on securities fraud charges but has not stood on trial yet.

A securities law expert, Marc Fagel, said that it was unusual for one state to investigate a national, publicly-traded company in another State as it is usually the province of the SEC.

Fear in Washington Democrats believe Former President Donald Trump was a threat to Democracy. He was banned permanently from big tech platforms ahead of the US elections. Arguably, his absence on social media contributed to his downfall, and his ban was to stop hate speech and crackdown on extremists.

Elon Musk has a different take on free speech and doesn't believe in the idea of 'reasonable restrictions’ on them. The free speech absolutions he has is scaring Democrats and the suits in the White House.

Musk said, "I don't think it was not correct to ban Donald Trump, that was a mistake because it alienated a large part of the country and did not ultimately result in Donald Trump

68 | March - April 2022 | International Finance

Elon Musk's Net worth by Year: 2020

$24.6 bn 2021

$151 bn 2022

$219 bn Musk's net worth after Twitter bid

$198.7 bn Source: Statista

not having a voice." Though this has rattled many on the Left, he is not entirely wrong. Donald Trump has made his app and free speech platform called Truth Social, which

has promised to deliver an "engaging and censorship-free experience."

It was trending on the App Store, but Google was not letting the former president list the product on Google Play Store. It has become a sort of echo chamber for the far-right in the US. When asked if he would return to Twitter, he said he would wait six hours after Truth Social posts before using any other platform. Some fear Trump's victorious return due to the Twitter takeover.

Many Democrats like Rep. Alexandria Ocasio-Cortez anticipate an explosion of hate crimes following Musk's Twitter policies.

Sen. Elizabeth Warren called it "dangerous to our democracy."

Republicans like Ted Cruz dubbed it the "biggest development for free speech in decades," and far-right politicians like Marjorie TaylorGreene were ecstatic.

AWARDS 2022

Celebrating Excellence International Finance Awards 2022

Nominations Open for EMEA Log on to awards.internationalfinance.com

New Corporate Digital Banking Services Via Mobile App and web

For more information, visit dukhanbank.com or call 800 8555 Download Dukhan Corporate to start using our digital banking services

*Terms and conditions apply.

dukhanbank.com

800 8555

4410 0888