Foreword
Digital technologies are setting free streams of data and enabling new forms of finance. New asset classes, new access routes and new financial ecosystems are emerging across our global footprint, and local and regional players are seeking to make the most of them.
At the same time, the turbulence of recent years is giving way to glimmers of optimism that relationships can be rebuilt and the benefits of global cooperation re-recognised. Standard Chartered forms a key strand of the connective tissue between developed, emerging and frontier markets. We are witnessing signs that the fruits of digitalisation and innovation are spreading more rapidly, solidifying the investment case across a wide geography where returns are greatest.
Our theme for this edition is Engines of growth - How regulation and technology are reshaping Emerging Markets.
In our first article, Emerging and Frontier Markets: Market reforms enabling frictionless investor access, we look at how emerging markets are working to ensure that they are attractive destinations for the deployment of capital. India, previously hindered by paper-based bureaucracy, now allows foreign portfolio investors to submit many documents in digital form, as part of a broader effort to speed up administrative processes.1
In the Middle East, major states are likewise working to streamline access. Saudi Arabia’s stock market has been included in key emerging-markets indexes, due to its comprehensive reform programme. It is also among the countries competing for leadership in Islamic finance, which has proven a successful means of mobilising capital in a way that accords with regional values and which remains a dynamic area of innovation. There is growing interest in sustainable sukuks, for example, with Standard Chartered acting as sole sustainability structurer for Dubai Islamic Bank’s USD1 billion issuance this year.2
Our second article looks at data as the core feedstock of custodian banking. In Custody 2.0 – Driving success through a data-centric strategy, we note that clients increasingly expect data provisioning to happen in real time or close to it, so they can react to fast-moving events, using all available information smartly and efficiently when it comes to risk-management.
For this reason, cumbersome manual processes and spreadsheets are increasingly giving way to automation and two-way data exchanges through the use of Application Protocol Interfaces (API), such as the one Standard Chartered launched in Q3 2023 to check the proof of underlyings in restricted currency markets.
Then we go to China, where the launch of the northbound Swap Connect is building upon the landmark successes of Bond Connect, by allowing investors to access onshore China’s USD3 trillion3 interest rate swap market in a way that will not only expand and expedite trading opportunities in derivatives, but also improve risk management and align processes to international standards. Swap Connect – Opening new doors, connecting you to new opportunities explains how this works in detail.
The pace of innovation poses a challenge to established financial centres, which must build on their traditional strengths while cultivating new ones. Our fourth piece, Realising potential, together: The future of the Singapore funds ecosystem, looks at how Singapore is tackling the challenges that lie on the path to becoming Asia’s most successful regional funds hub amid the rapid digitalisation of financial services.
Fund tokenisation is one aspect of this, given its potential to bring greater efficiency, transparency, customisation and cost savings. Creating digital sandboxes within which experimentation can occur, and the necessary collaborations embedded, will be important as Singapore adapts to the changing customer demands of recent years.
Tokenisation is also the theme of our final article, How will technology shape the future of asset servicing? It draws from the expertise of panellists speaking at this year’s SIBOS conference to predict how the current frenzy of digital innovation might settle in terms of re-inventing custodianship so that it meets the new expectations of asset owners for fast, responsive and secure services while avoiding some of the negative headlines that distributed ledger technology has generated in the recent past.
The impact of regulation and technology advancements will be felt most dramatically in countries that until recently were more predominantly associated with greater bureaucracy and more complex market access. Established financial centres will need to work swiftly to ensure that their longstanding advantages are not quickly eroded by the adoption of digital systems and high-quality regulation across an increasing number of emerging markets.
We believe that the outcome is likely to be a hyper-connected investment space that creates a more level playing-field for developing countries and emerging markets to tap into opportunities as they arise, with the gains going to the most nimble and data-driven players.
This is the future that Standard Chartered is getting ready for, and for which we are helping our partners prepare.
Margaret Harwood-JonesGlobal Head, Financing and Securities Services, Financial Markets
