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Saudi tycoons begin to invest heavily in China

Middle Eastern capital is trying to use huge public funds to reorganize the Chinese stock market



According to caijing.com, a Securities Times reporter learned that E Fund had recently signed a memorandum of cooperation with Riyadh Capital, a leading asset management firm in Saudi Arabia, to help further promote the integration of the capital markets of China and Saudi Arabia. The memorandum of understanding was signed at the 2024 Saudi Capital Markets Forum in Riyadh. It is also reported that, in the vision of global development, "E Fund and Riyadh Capital will give full play to each other's local advantages and professional capabilities to explore cooperation in different markets and different asset classes."


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Analysts claim that Middle Eastern "tycoons" will increasingly increase their investments in the Chinese capital market, estimating the liquidity injection by Saudi funds in the purchase of class A and H shares at around 20 billion yuan.


Currently, large funds from the Middle East are becoming an extremely important source of vitality for Chinese public funds and stocks.

 

E Fund's cooperation with Saudi Arabia's capital institutions is another latest case of cooperation between China and Saudi Arabia's capital markets in recent months.


At the end of November last year, Saudi Arabia's first Asian ETF, launched by CSOP, a subsidiary of Southern Asset Management, was listed on the Hong Kong Stock Exchange, and its asset size, among similar products, is the largest big in the world.


Middle Eastern capital is trying to use huge public funds to reorganize the Chinese stock market

Wang Zhuofeng, CSOP's managing director and head of sales in the Asia-Pacific region, said client response to the Saudi ETF exceeded expectations and investors outside Asia also participated.


Furthermore, in December last year, the China Securities Regulatory Commission website showed that the Huatai-PineBridge Fund has "reported" a fund called "Huatai-PineBridge CSOP Saudi Arabia ETF" for authorization. If officially approved, this fund could become the first Saudi investment in the mainland market in the ETF listed on the Hong Kong Stock Exchange.


In addition to the collaboration with Chinese fund companies regarding private client products and channels, it should be noted that Middle Eastern institutions have also started to significantly increase their interest in investing in Chinese assets.


In January this year, as a major fund holding company, Rongsheng Petrochemical announced that it had signed a "Memorandum of Understanding" with Saudi Aramco, in which Rongsheng Petrochemical planned to acquire 50% stake in Jubail Refining Company of Saudi Aramco.


Furthermore, Saudi Aramco plans to acquire no more than 50% stake in CICC Petrochemical and develop the Rongsheng New Materials (Zhoushan) project. Previously, Saudi Aramco had also acquired 10% of Rongsheng Petrochemical through its subsidiary.


In December last year, Kingdee International, a company listed on the Hong Kong Stock Exchange, announced that the Qatar Investment Authority had participated in the private placement of the company for approximately $200 million. Almost simultaneously, NIO, one of the funds holding Hong Kong stocks, announced that it had signed a new share subscription agreement with CYVN Holdings, an investment institution in Abu Dhabi. Under the agreement, CYVN Holdings will make a total strategic investment of approximately $2.2 billion in cash in NIO through its subsidiary CYVN Investments.


Research information disclosed by listed companies also shows that in recent months, QFII institutions in the Middle East have increasingly invested with domestic public funds in Chinese A-share listed companies, including Abu Dhabi Investment Authority, l 'Oman National General Reserve Fund and other Middle Eastern institutions.


Several A-listed companies, such as Control Technology and Samsung Healthcare, were included in the survey list. Research reports from Industrial Securities show that the proportion of Chinese equity assets of many Middle Eastern investment institutions is increasing rapidly. Taking the Abu Dhabi Investment Authority's investment in equity assets as an example, the percentage of investment in Chinese assets by these institutions increased from 4.5% at the end of 2019 to 22.9% in the first quarter of 2023 .


Regarding cooperation with Riyadh Capital, Liu Xiaoyan, president (joint) and general manager of E Fund, said that the high level of openness of China's capital market provides opportunities for the international development of fund companies.


And Fund has always insisted on steadily pursuing its international development strategy. With cooperation with Riyadh Capital, E Fund will further expand its investment capabilities in Saudi Arabia and the broader Middle East region, "continuing to enrich products and services and also build a platform for Saudi investors and a bridge to the Chinese market".


Abdullah Alshwer, CEO of Saudi Riyadh Capital, believes that the company's cooperation with E Fund will provide broader channel coverage and more comprehensive product layout in Asia, as well as expand richer investment opportunities in the global market for Saudi clients locals.


Although E Fund has not yet revealed the specific form of cooperation with Riyadh Capital in Saudi Arabia, industry insiders speculate that the development of foreign clients and large funds may be an important consideration for E Fund's cooperation with the Saudi Arabia.


In turn, "relevant institutions in the Middle East and local high-capital clients can bring entrepreneurial imagination to E Fund and, to a certain extent, attract new capital into the domestic stock market, further enhancing the ability of public funds to acquire assets in the stock market".


A research report published by CITIC Securities also pointed out that the collapse of diplomacy and currency cooperation with the US has led to the development of the "petro-yuan" "which will gradually expand in the future".


“Currently, Middle East funds tend to be relatively overweight traditional industries related to their own countries, but, as the strategic industrial upgrading of the Middle East's major economies progresses, they are expected to increase their allocation to China's advantageous emerging sectors. For the secondary market and the stock market, the short-term incremental logic is relatively weak, but attention can be paid to structural changes in the area of capital preferences in the Middle East."

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