Sovereign wealth funds in the Middle East are looking to diversify their investments and allocate more capital to mainland China.
However, they lack awareness of the investment tools offered by Hong Kong to access the Chinese market.
Standard Chartered Bank’s Asia CEO, Benjamin Hung Pi-cheng, highlighted the advantages offered by the Shenzhen-Hong Kong Stock Connect, Shanghai-Hong Kong Stock Connect and Bond Connect to senior executives during a recent tour of the Middle East.
Three major sovereign wealth funds in the Gulf region (Public Investment Fund in Saudi Arabia, Abu Dhabi Investment Authority, and Mubadala Investment Company in the UAE) expressed interest in increasing their assets allocated to China.
China has a partially closed capital account policy and is under-represented in global asset allocation portfolios, with only 3% of central bank reserves being in yuan.
Hong Kong is poised to play a big role in facilitating transactions in renminbi over the next 5-10 years due to its position as a financial hub.
Gulf state companies may find secondary listings in Hong Kong strategically advantageous despite the different regulatory framework.
Beijing and Hong Kong are also in prime position to offer 5G technology, cloud services, logistics and innovations as Saudi Arabia and the UAE look to diversify away from oil revenue.
Many countries are closely monitoring the potential for the Chinese economy to rebound after the COVID pandemic, with a focus on sustained economic recovery and the return of Chinese tourists with high spending power.
