Please outline the three most important macro trends that you believe will impact the market infrastructure industry in 2019.
Major stock markets witnessed turbulence and an increase in volatility last year; indeed, some international stock markets ended the year with losses. Against that backdrop, I believe the three following factors are the most important macro trends that may impact the market infrastructure industry in 2019:
1. High global interest rates - Interest rates are a prime driver of stock prices. Globally, interest rates have been low, as central banks aim to help their economies to prosper. On the other hand, the United States has entered a regime of climbing interest rates. This will be a big challenge for stock markets if other major economies decided to follow the US's steps.
2. Slowing global economy - We see many institutions revising their expectations for economic growth in 2019, and this will have an effect on stock markets. For instance, the International Monetary Fund (IMF) stated in October 2018 that the downside risks to global growth had risen in the past six months and the potential for upside surprises had receded. Also, the IMF cut its global economic growth forecasts for 2018 and 2019, saying that the US-China trade war was taking a toll, and emerging markets were struggling with tighter liquidity and capital outflows. In December 2018, the Federal Reserve Bank lowered its expectations for US GDP in 2019 to growth of 2.3%, down from the September projection of 2.5%.
3. The political situation in the Middle East and neighbouring countries - The Middle East is considered to be an area that has witnessed great changes over the years. The region has suffered from instability and regional conflict since the beginning of the Arab Spring, and this reflects on the stock market environment and the market infrastructure industry more generally.
I believe 2019 will be very challenging for stock markets. Nevertheless, I am confident that by adopting the most advanced technologies, applying the most robust disclosure and transparency practices, and encouraging entrepreneurs and new ideas, stock markets will sustain their momentum, and will continue to grow.
The WFE’s Sustainability principles (launched in October 2018) and its annual environmental, social & governance (ESG) survey show us that more and more exchanges and CCPs are taking a leadership role in promoting the sustainable finance agenda. How is your business taking a more sustainable approach to the financial system?
The ASE takes a leading and important role in developing and promoting the investment environment in Jordan, as well as encouraging listed companies to adopt ESG best practice. In 2016, the ASE joined the Sustainable Stock Exchange Initiative (SSE) - an initiative launched in 2009 by the United Nations that aims to raise awareness on sustainability issues, and promotes better ESG disclosure.
The ASE has also taken the following steps towards increasing awareness of the importance of sustainability in the Jordanian Capital Market:
- Issued the 'Sustainability Reporting Guidance' document, which includes guiding steps for companies on sustainability reporting, the information that needs to be included, and advice about the way they disclose their sustainability performance.
- Issued two brochures about the definition of sustainable development, its history and benefits.
- Celebrated the 'Ring the Bell for Gender Equality' initiative for three consecutive years.
In your view, what’s the technology most likely to disrupt global capital markets in the next 12 months?
There are several new technologies that will have a great impact on global capital markets, disrupting in both the short, and long terms. One of those technologies I believe is DLT (Distributed Ledger Technology), more widely known as blockchain technology. Blockchain has attracted significant interest in the financial services industry in recent years for its potential to impact various aspects of the capital markets, including market efficiency, transparency, post-trade operations (settlement) and many more.
On the other hand, as this promising technology is still immature, some important implementation considerations are crucial, around issues such as governance, security, and the operational structure of networks running DLT systems. This should be further investigated before rushing quickly to adopt such new technologies.
What are the key strategic initiatives you’re working on at the moment?
The ASE prepared its strategic plan for the years 2018-2020. This plan includes three strategic objectives for the stock exchange: enhancing, and increasing interest in, the investment environment; developing the technical environment; and developing the work of the exchange to achieve institutional excellence.
The plan also includes a number of important projects, including:
- The establishment of a securities information centre;
- The implementation of training and advisory programmes for issuers of securities;
- The implementation of a new electronic trading system;
- The implementation of an electronic disclosure system using XBRL for listed companies and brokerage firms;
- The preparation of a sustainability report for the stock exchange; and
- The preparation of a corporate governance report.