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Wall Street CEOs flocking to Riyadh show, Khashoggi furor over
[LONDON] If there was any doubt the titans of global finance aren't holding grudges over Saudi Arabia's human rights record, their appearances at a Riyadh conference this week should lay those to rest.
Business executives including HSBC Holdings Plc Chief Executive Officer John Flint and BlackRock Inc CEO Larry Fink participated in panel discussions on Wednesday at a financial summit in Saudi capital-the same men who six months ago boycotted a similar conference over the murder of US-based journalist Jamal Khashoggi.
"We are excited about the role that we can play here," Mr Flint said on a morning panel about transforming the Saudi financial sector. "This is an economy we have a lot of confidence in. I think the future is bright."
Convened just a day after Saudi Arabia executed 37 citizens found guilty of various terrorism-related charges, the Financial Sector Conference's popularity is the latest sign that it's back to business as usual for Saudi Crown Prince Mohammed bin Salman. Two weeks ago, the kingdom's oil giant Aramco raised US$12 billion in its first bond sale, after receiving bids more than eight times that amount.
It's been customary historically for global businesses to turn a blind eye to human rights issues in the kingdom. But the murder of Khashoggi, a government critic, seemed at first that it might alter that equation, especially as some Western governments suspected Prince Mohammed of ordering the murder. Saudi authorities have denied any involvement and have since tried 11 suspects. The US has blacklisted 16 Saudi nationals for their role in the killing.
Global financiers have been inching back since, deeming the kingdom's oil wealth, geopolitical importance and the promise of advising on deals related to a reform plan driven by the crown prince as too valuable to ignore. The two-day event this week is being hosted at the Ritz-Carlton hotel in Riyadh, where the kingdom detained dozens of billionaires in 2017 as part of what the government called an anti-corruption crackdown that many suspected was, rather, an attempt by Prince Mohammed to stamp out opposition.
The purge has complicated Saudi Arabia's efforts to attract the long-term foreign direct investments it needs to reduce its reliance on oil in any meaningful way. While FDI more than doubled last year to about US$3 billion, it's well below the average of the past decade and that's in part because of the crown prince's unpredictability.
Even so, there was a mood of optimism at the conference this week. The meeting hall was packed throughout the morning, in stark contrast to the event in October, when many of the executives who did attend pulled their neck ties over their badges to conceal their identity. Mr Flint and Mr Fink both called the policies being pursued to open up the world's top oil exporter "amazing."
Bankers like them are flocking into Saudi Arabia because they're eager to participate in deals in the pipeline - like mergers and acquisitions and initial public offerings - that will give them access to fee income as transactions in Europe and Asia languish. JPMorgan Chase & Co, Morgan Stanley, HSBC, Citigroup Inc and Goldman Sachs Group Inc this month helped Saudi Arabian Oil Co sell its bond, one of the most oversubscribed debt offerings in history.
Mr Fink, who said BlackRock is opening its first Saudi office, said he sees "very large opportunities" across the Middle East after investing in Aramco's bond. The region is "becoming more secure" and increasingly in need of retirement investments, he said.
Other attendees this week include Martin Gilbert, vice chairman at Standard Life Aberdeen, Ken Moelis, the chairman and CEO of Moelis & Co., Simon Cooper, the CEO of corporate and institutional banking at Standard Chartered Plc and David Schwimmer, the CEO of the London Stock Exchange. Credit Suisse Group AG has received a local banking license, Finance Minister Mohammed Al-Jadaan told the conference.
While he's garnered international plaudits with measures including allowing women to drive, Prince Mohammed's image as a moderniser has been undermined by Khashoggi's murder in Istanbul and moves to jail hundreds of businessmen, royals and activists in an alleged crackdown on corruption.
Yet for some banks, Saudi Arabia is too important to ignore. HSBC, for one, is among the most active international banks in the kingdom, employing more than 3,000, and has been the top adviser for initial public offerings since 2010, according to data compiled by Bloomberg. Its local unit is in the process of buying a rival part-owned by Royal Bank of Scotland Group Plc, a $5 billion deal to create the kingdom's third-largest lender.
The relationship goes even deeper than deals: In January, Bloomberg News reported that Saudi Arabia hired HSBC banker Rayyan Nagadi to establish a privatisation unit. Other HSBC veterans to join the Saudi government include Mohammad Al Tuwaijri, minister of economy and planning, and Fahad Al Saif, the head of the kingdom's debt management office.
"We often joke in the senior levels of HSBC that we are exporting a lot of talent to the government of Saudi Arabia," Mr Flint said.
Other attendees keen to build their presence in the kingdom included Luke Ellis, who runs London-based hedge-fund manager Man Group Plc. "It's amazing how far the Saudi debt market has come in a short space of time," he said, adding he hoped to open an office in Riyadh.
Speaking on the same panel as HSBC's Flint, Daniel Pinto, one of JPMorgan's most senior executives, warned that Saudi Arabia still has work to do. "If you want to succeed, you really need to have a very strong capital market," he said.
Last year, MSCI Inc said it would include Saudi Arabian stocks in its emerging-market gauge. The Tadawul All Share Index in Riyadh climbed 0.1 per cent on Wednesday, bringing its gain this year to 18 per cent.
"The inclusion of the indices is clearly going to result in an inflow into the country," Mr Flint said.