Henrik Raber

Although economic challenges remain, Standard Chartered’s head of global credit markets is optimistic there will be several positive drivers for capital markets activity in 2023. Marie Kemplay reports.

The global economy ended 2022 in very different place to where it started. The year’s early optimism for a steady post-Covid 19 reopening and recovery was quickly tempered by inflationary pressures and supply chain challenges, and heavily exacerbated by Russia’s invasion of Ukraine in February.

However, as we enter 2023, it would be wrong to cast the prospects for all parts of the global economy in the same light. For Henrik Raber, global head of global credit markets at Standard Chartered (SC), which defines its key markets as Africa, the Middle East and Asia, there are certainly bright spots.

Career history: Henrik Raber 

2021 Global head of global credit markets, Standard Chartered

2018 Global head of credit markets, Standard Chartered

2017 Global head of capital markets and co-head, capital structuring and distribution group, Standard Chartered

2014 Global head of global capital markets, Standard Chartered

2010 Global head of debt capital markets, Standard Chartered

2009 Regional head of capital markets for Europe, Africa and Americas, Standard Chartered

“For us, it is about looking forward and considering how we can support the capital flows that are taking place,” he says. He gives several examples of core SC markets where he believes there are good economic stories to tell. “For example, with India we see a lot of international investor interest. The economy is doing well, with a large domestic market, growing wealth and increasingly sophisticated supply chains developing.”

He also points to parts of Latin America, as well as the Gulf region, where healthy economic growth is taking place. “There are definitely challenges in the current climate, but there are positives too.”

Investing in infrastructure

As well as activity happening within specific geographies, there are also some major strategic themes that he believes will drive activity. “In the globalisation we saw taking place over the last 30 years or so, the focus was very much about finding the cheapest supplier — that is now changing. There is now a strong global theme about not being so reliant on others, whether that is for energy, water, food or other resources,” he suggests. “Countries will be investing a lot more in their own infrastructure, and that will require financing and capital raising.”

Combine this theme with other key trends, such as the sustainable transition and the drive for technological innovation, and this desire for self-sufficiency will also lead to an increase in demand for localised manufacturing capabilities. “Whether for semiconductors, solar panels or batteries, there will likely be a significant push in many different geographies to build manufacturing facilities for these new technologies,” he adds.

Global financing models

Mammoth levels of investment will be needed at a global level to deliver the manufacturing capacity, as well as upgraded infrastructure to support the economy of the future. For Mr Raber, given the scale of the investment needed, it is clear that a long-talked about expansion in public–private partnership financing or blended finance will need to take place.

“This is a topic that has been talked about extensively for the past two to three decades, and there has been progress,” he says. “We have seen more partnerships, different ways of delivering credit enhancements or credit insurance, enabling capital to be leveraged to deliver more funding — but this is going to have to be done on a vastly increased scale going forward.”

Whereas such innovations have previously been targeted at specific countries or sectors, funding models to support investment in a range of international contexts are going to be needed in future, due to the global nature of the challenges being faced. “These are issues that don’t just affect one country, or even one continent. Issues such as global warming will require collective solutions,” he says.

Mr Raber suggests that developing increased standardisation in approaches, and potentially some rationalisation among export agencies and other bodies supporting this kind of financing, would be helpful to deliver larger capital flows. He believes there is already some momentum behind this kind of action.

Different ways of thinking

In recent months, it has been suggested by a range of people — including high-profile voices such as US Treasury secretary, Janet Yellen, and COP26 president, Alok Sharma — that multilateral development banks, such as the World Bank, need to up their game in how they approach pressing global issues such as climate change, and to be bolder in how they utilise their capital in order to increase the impact of their work.

Mr Raber does not necessarily believe there needs to be any significant change at such bodies, but he is sympathetic to the idea that their approach may need to adapt. “If we’re going to leverage the capital available to its most effective degree, there’s going to have to be some different ways of thinking. That’s not to say what has been done so far hasn’t been effective, but the scale of the issues at hand is just much bigger than what we’ve been trying to do previously. We need to figure out how to get the best out of each agency, individually and collectively.”

Pent-up demand

For more standard capital markets activity, he is also optimistic for a pick-up in issuance volumes next year, but realistic that several headwinds affecting banks across the board remain. “In our [main markets], year-on-year bond issuance is down by around 30% and loan volumes by about 20%,” he says. “And until the volatility calms down, that’s unlikely to significantly change.”

He believes the pause is less about the fact that the markets have become expensive for issuers, as “overall issuers recognise that there will always be market dynamics at play, and you have to pay the going rate”, and more because of the simple fact that “it is very difficult to go out and do transactions with rates moving around”. Mr Raber adds that the level of market volatility we have seen in 2022 is comparable with the levels experienced during the financial crisis.

However, he is convinced that the slow pace of deals in 2022 has created significant pent-up demand among issuers who will need to get access to the markets soon in order to refinance debts that are due to mature, without even considering any additional borrowing to fund mergers and acquisition activity or other initiatives.

“If you look back over recent years ... those were big borrowing windows, and a significant amount of that borrowing is coming up for refinancing,” Mr Raber says. “For 2023, there are a lot of borrowers who will be waiting to go, and if the markets normalise, I think the first quarter may see a bit of a stampede.”

Market digitalisation

Ongoing efforts to make the loan and bond markets more efficient via increased digitalisation and standardisation could also have an important impact in boosting the market, he posits. While greater progress has been made in the bond markets than with loans, he suggests there is significant scope for change in both.

“With bonds, the documentation has become more standardised, for instance with medium-term note programmes, execution has become more digital — there are now electronic book-building programmes, electronic allocation, trading, etc, and many of the roadshows have moved online post-Covid, so certain aspects have already moved forward,” says Mr Raber. 

[tokenisation] will support greater tradability, particularly in combination with fractionalisation

In addition, he believes that developments around tokenisation within the bond markets will start to have a substantive impact, particularly in making bond markets more open to retail investment and the assets more easily tradable via electronic marketplaces. He says: “It will support greater tradability, particularly in combination with fractionalisation where investors will be able to own much smaller pieces — which will make ownership far more accessible to retail investors. Exactly what these assets end up looking like and how they will work is still being worked on, but there is a lot of activity happening in this area which clearly is going to have a significant impact.”

Whereas, with the loan markets, progress has been much more limited with loan documentation and syndication remaining a much more manual process. Mr Raber comments: “It is very interesting because loans are clearly a fundamental financial tool. And if you look at consumer finance, you can go on an app and get a loan almost immediately. Whereas for loans in the institutional finance space, digital has not yet made a big impact.”

He believes there are efforts underway to make changes within the loan markets, and with much of the transition from Libor to other benchmark rates now complete, Mr Raber is hopeful that more resources may be directed towards digitalisation. 


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