Major sovereign wealth funds in the Middle East are building up their portfolios of Chinese stocks, and investors say their appetite is growing as trade and diplomatic relations between the two sides improve.
The Abu Dhabi Investment Authority, one of the world’s largest sovereign wealth funds, became a major shareholder in coal and energy companies China Xinhua Energy and Xijin Mining in the fourth quarter of 2022, and has also raised investments in other Chinese equities.
KIA strengthened its presence in Shenzhen airports and Angel Yeast Yeast and Food Processing in the fourth quarter.
Neither responded to requests for comment, and these investments do not necessarily reflect a broader trend. But this coincides with China’s increased efforts to raise money from the Middle East and Beijing’s efforts to settle oil contracts in yuan, which creates demand from oil sellers for assets denominated in Chinese currency.
It also comes at a time when investment managers are tracking a positive shift towards China in the Gulf, while many other foreign funds remain skeptical or reluctant to invest in China.
“The desire to reduce dependence on the US is increasing interest in investing in China and building stronger trade relations with China, including switching to petroyuan,” said Jason Xu, founder of Rallyant Global Advisors in Hong Kong, referring to receiving Chinese money for oil sales.
Xu said he recently traveled to Saudi Arabia, Abu Dhabi, Dubai, Oman and Kuwait to meet with sovereign and pension fund officials who “hope to invest in China.”
This increased interest is due to the growing role of China in the Persian Gulf.
Last month, Beijing brokered a landmark deal to restart relations between Iran and Saudi Arabia. Chinese President Xi Jinping told Gulf Arab leaders in December that China would buy oil and gas in yuan, which could spur additional investment.
In contrast, some Western funds remain wary of investing in China amid geopolitical tensions over Taiwan and regulators’ concerns about Chinese asset ownership.
“From a political standpoint, there is no such problem for Middle Eastern investors … they feel that China’s political system is in order and they can strengthen ties with China,” said Jie Lu, head of China investment at Dutch Robeco Asset Management.
