Middle Eastern Sovereign Wealth Funds Deepen Investment in China

As global oil prices experience a surge, Middle Eastern oil-producing countries are gaining substantial oil export revenues, leading to a significant increase in the size of their sovereign wealth funds. And, they are expanding their investments in China.

Two major sovereign wealth funds from the Middle East, the Abu Dhabi Investment Authority and the Kuwait Investment Authority, have maintained or even increased their holdings in A-share companies, as revealed in third-quarter reports.

The total shareholdings that the Abu Dhabi Investment Authority holds in A-share companies where it appeared as among the top ten circulating shareholders increased from 7.313 billion yuan in the mid-year report to 9.509 billion yuan at the end of the third quarter.

The Kuwait Investment Authority saw a slight decrease in its holdings, from 6.375 billion yuan in the mid-year report to 4.947 billion yuan, but this was not significantly different from the 5.732 billion yuan reported in 2022, indicating a gradual divestment strategy. These institutions have shown a particular interest in the pharmaceutical and biotech sectors within the A-share market.

Since 2020, the Abu Dhabi Investment Authority has continuously increased its holdings in mainland China, with the proportion of Chinese mainland assets in its portfolio rising from 4.5% at the end of 2019 to 22.9% in the first quarter of 2023. This shift has moved China from fifth to third place in its investment rankings.

Beyond the secondary market, Middle Eastern funds are also active in primary equity investment. In March 2023, Saudi oil giant Saudi Aramco acquired a 10% stake in Rongsheng Petrochemical for 24.6 billion yuan. In June, NIO received approximately US$1.1 billion in strategic investment from CYVN, an investment institution in Abu Dhabi, UAE.

On November 8, media reports stated that the Saudi Arabian Sovereign Wealth Fund, the Saudi Public Investment Fund, is in talks to invest at least US$250 million in Chinese electric vehicle manufacturer Human Horizons.

The Saudi Arabian Investment Ministry had already announced in June this year that it had signed an agreement worth US$5.6 billion (approximately 40.768 billion yuan) with Human Horizons. The two parties will cooperate in the development, manufacturing, and sales of electric vehicles.

Like the Abu Dhabi Investment Authority, another sovereign wealth fund from the UAE, Mubadala, began diversifying its investments in 2019. The institution reduced the proportion of domestic assets in the UAE in its investment portfolio from 28% to 20%, while increasing its focus on Asia.

In 2021, Mubadala’s CEO, Mubarak, announced that Mubadala plans to increase investments in China and India, aiming to double the total assets under management in these two countries by 2030. At the same time, Mubadala will shift away from its largest traditional business sectors (such as energy and commodities) and increase investments in technology, healthcare, and innovative fields.

In March 2023, Mubadala and the global investment management company 42XFund co-led a US$300 million Series B funding round for JD Industrials, a Chinese industrial supply chain technology company.

In April 2023, Mubadala, together with CBC Group, Asia’s largest healthcare investment firm, jointly invested US$315 million to support the financing of Haisen Bio, a Chinese pharmaceutical company.

According to research data from Orient Securities, prior to 2023, Mubadala also invested in Chinese technology companies such as Boss Zhipin, Kuaishou, and Ziroom.

In 2015, the China-Arab Fund was established with a total scale of US$10 billion, with an initial investment of US$4 billion, jointly funded by the China Development Bank, the State Administration of Foreign Exchange, and Mubadala.

It is reported that the investment strategy of the China-Arab Fund is quite flexible, with a certain degree of autonomy in alternative asset allocation, asset stratification, and investment in special industries. The due diligence of investment projects is jointly executed by the China Development Finance, Mubadala, and professional investment teams.

In 2017, the China-Arab Fund announced its first foreign investment β€” participating in a new US$4 billion funding round for Meituan Dianping. By 2020, Mubadala had invested approximately US$2 billion in China through the China-Arab Fund in more than 15 industries.


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