As China-Middle East connectivity flourishes, with Saudi Tadawul Group (STG) and HKEX bringing investors and issuers from both regions together at this week’s international Capital Markets Forum in HKEX’s Connect Hall, Hong Kong’s superconnector role is there for all to see.
At this week’s event we will bring together more than 500 participants and create the conditions and opportunities to further the progress already made in growing cross-region connectivity and investment flows in recent years.
Since 2022, there have been many high-level exchanges between government officials, business leaders and policymakers from Hong Kong, Mainland China and the Middle East, yielding results such as a China-Saudi Arabia strategic partnership and 13 MoUs signed during the Hong Kong Chief Executive’s trip to Saudi Arabia and the United Arab Emirates in February 2023.
In the short time since our engagements began, HKEX, as an exchange operator and regulator, has made progress in building cross-region connectivity.
In February 2023 we signed a MoU with STG, have shared knowledge and best practices, opened the door for secondary listings by Saudi-listed companies by adding STG as a recognised stock exchange in September 2023, and listed APAC’s first and the world’s largest Saudi-focused ETF in Hong Kong in November 2023.
There’s further progress happening outside of HKEX too.
For instance, the Hong Kong Monetary Authority is working with the Saudi Arabia Central Bank on financial innovation and is also developing plans for the listing in the Middle East of a Hong Kong-focused ETF.
And the Hong Kong Science and Technology Parks Corporation has signed partnership and collaboration agreements with innovation and technology leaders in Saudi Arabia, Qatar and the United Arab Emirates.
Following on from policy commitments and institutional initiatives, we are now seeing signs of increased investment activity on both sides.
According to Global SWF, sovereign wealth funds from Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates collectively invested more than US$2.3 billion into Greater China in 2023, compared with about US$100 million in 2022.
In April this year, the Bahrain-based investment company Investcorp announced a US$1 billion fund – developed with a large anchor commitment from China Investment Corporation – that will invest in logistics, consumer and healthcare companies across Saudi Arabia. This commitment signifies Chinese investors’ growing interest in deploying capital in the Middle East.
The prospects for further growth are strong.
That’s because the Middle East and China are going through profound, long-term changes that have the potential to create a significant number of opportunities.
The Middle East – and specifically the Gulf Cooperation Council (GCC) economies – are diversifying their economies away from oil as they prepare for a fossil-fuel-free future.
The biggest Gulf economy, Saudi Arabia, is leading the charge – launching ‘Vision 2030’ in 2016 and laying out the blueprint for the country’s transformation into a modern, digital, and services-led economy.
Clean tech is a key area of focus. The Kingdom plans to significantly increase its nuclear and renewable energy capacity and its production of clean hydrogen and electric vehicles by 2030.
The second biggest economy in the Gulf, the United Arab Emirates, has similar ambitions, allocating US$160 billion of renewable energy investments as part of its Net Zero by 2050 initiative.
Financing energy transition projects is costly, and having access to multiple sources of funding beyond domestic markets is crucial. With an onshore capital market that’s set to grow to US$100 trillion in the next decade, China can provide the additional funding needed to support the Gulf’s efforts to incubate new sectors.
China’s dominance in the clean energy supply chain opens the door for collaboration in technological innovation. In 2022, China invested US$546 billion in energy transition, nearly four times as much as the US. And it is a leader in key technologies such as EV batteries and solar energy.
More collaboration on this front would be good news for technological advancement, as well as for commerce and climate action. And there is room for collaboration beyond green energy, given the regions’ shared endeavours in infrastructure, healthcare and digitisation.
We know that collaboration and capital flows require connectivity, and Hong Kong, as a gateway to China’s capital markets, is the perfect place to provide it.
To meet the demand for financing from companies operating in clean tech and energy transition sectors, HKEX introduced a new listing chapter, 18C, in 2023 to open new routes to capital for companies in specialist technology sectors including new energy and environmental protection, advanced materials, agricultural technologies and next-generation information technologies.
Our Connect programmes also provide international investors easy access to China’s markets, with Northbound and Southbound channels linking Hong Kong with onshore markets and we are constantly enhancing the programmes’ product ecosystem and trading mechanisms to provide more opportunities for investors and issuers. For instance, in March 2023 Southbound Stock Connect was expanded to include international companies with a primary listing in Hong Kong.
That means Hong Kong is home to the only market in the world offering connectivity to two massive, uncorrelated pools of capital.
A market where companies looking to fund their growth ambitions can access both the global investor pool in Hong Kong and the sizeable, largely untapped, fast-growing investor base in Mainland China.
This was reinforced very recently by the China Securities Regulatory Commission, which affirmed Hong Kong’s pivotal role in supporting market connectivity between China and the world, as well as to host the listings of top Chinese companies.
That makes this week’s Capital Markets Forum such an exciting prospect.
Whether facilitating cross-listings, stake acquisitions, new infrastructure enhancements, or the expansion of investment products, the possibilities and opportunities in front of us are significant.
So I’m looking forward to joining the event in Connect Hall this week, connecting investors with issuers, furthering the dialogue and seeing how we can work together to progress our markets and global connectivity for the prosperity of all.
