Source: Wall Street
Author: GE Jiaming
The cooperation between China and Saudi Arabia is deepening day by day. Apart from the petrochemical industry, game e-sports and leisure consumption industry are recent investment hotspots in Saudi Arabia. Photovoltaic may become an important industry for Saudi investment in China, and science and technology is expected to become a new blue ocean for investment.
Since the beginning of this year, with the deepening cooperation between China and Saudi Arabia, the oil giant Saudi Aramco has accelerated its investment in China. In addition to the petrochemical industry, the game e-sports and leisure consumption industry, photovoltaic and technology industries are expected to usher in new opportunities.
On the evening of March 27th, AOC, a subsidiary of Saudi Aramco, bought 10 per cent plus one share of Rongsheng Petrochemical at a price of 24.3 yuan per share for a total consideration of 24.6 billion yuan, a premium of 88 per cent. Upon completion of the deal, AOC will hold 10 per cent plus one share of Rongsheng.
Rongsheng Petrochemical said that by signing the above agreement, the company and its subsidiaries will further consolidate the cooperative relationship with Saudi Aramco's existing crude oil procurement business.To obtain a long-term and stable supply of crude oil of 480000 barrels per day, as well as the supply of other chemical raw materials, and is expected to further expand overseas sales channels of chemical products to ensure the stability of the petrochemical industry chain.
On March 26, Saudi Aramco joined hands with Northern Industries Group and Panjin Xincheng Industrial Group to build a large-scale integrated refinery and chemical plant in Northeast China. The joint venture company is called Huajin Ami Petrochemical Co., Ltd., the three parties own 30%, 51% and 19% respectively. Panjin Xincheng Industrial Group said on its official Wechat account that it expects the total investment in the project to reach 83.7 billion yuan.
In addition, on March 2, Saudi Aramco signed a letter of intent with Geely and Renault to become a minority shareholder in the new powertrain joint venture between Geely and Renault.
Wall Street has previously pointed out that the strong complementarity of the economic structure has enhanced the depth of cooperation between China and Saudi Arabia, and the Saudi public investment fund has increased its overseas investment layout in recent years, except for the petrochemical industry.Game e-sports and leisure consumption industry are recent investment hotspots in Saudi Arabia. Photovoltaic may become an important industry for Saudi investment in China, and science and technology is expected to become a new blue ocean of investment.
Saudi Foreign Investment structure and Public Investment Fund (PIF)
According to Oriental Securities:
The outward investment of the Kingdom of Saudi Arabia is divided into two channels: public entities and private enterprises. Overseas investment in the public sector is promoted by the government and semi-government agencies, mainly the Saudi Public Investment Fund (PIF), chaired by Saudi Crown Prince and Prime Minister Mohamed.
Founded in 1971, the Saudi Public Investment Fund (PIF) is one of the largest sovereign wealth funds in the world, managing assets of 1.98 trillion Saudi riyals as of 2021 and achieving an annualized return of 25 per cent.
The PIF fund is an important part of implementing Saudi Arabia's Vision 2030. Saudi Arabia put forward the Vision 2030 plan in 2016:
12 trillion Saudi riyals (US $3.2 trillion) will be invested by 2030 to accelerate economic diversification and the transformation of the energy structure, and optimize the economic growth model that relies solely on energy exports.
According to the 2021 annual report, the key investment sectors of the fund are as follows:
Communications technology (25.6%), real estate (23.5%) and financial services (23.0%), followed by new energy (12.4%) and metal mining (7.5%).
Cao Jingnan, an analyst at Oriental Securities, pointed out:
Since Mohamed entered politics, he has promoted the strategy of "eastward diplomacy" and expanded cooperation with Asian countries. His ruling thought will affect the strategic layout of Saudi Arabia's overseas investment.Asian countries and emerging markets are likely to have more opportunities.
The attractiveness of Chinese market rises and the cooperation between China and Saudi Arabia deepens day by day.
At the end of 2022, with the optimization of China's entry and exit policy, superimposed leaders actively carried out diplomatic activities. The Chinese market has become more attractive to foreign investment, with net northbound capital inflows jumping in early 2023.
In recent years, the cooperation between China and Saudi Arabia has deepened, and the fund has begun to pay more attention to the Chinese market. It is reported that:
The fund has applied for a QFII license for foreign investors to invest in China, and can invest in RMB directly without the help of a third party.
China and Saudi Arabia have signed 34 investment agreements worth nearly 50 billion US dollars, covering green energy, solar photovoltaic energy, information technology and other fields.
In addition, the Hong Kong Stock Exchange is also actively striving for Saudi Aramco to list in Hong Kong.
Oriental Securities pointed out:
The economies of China and Saudi Arabia are highly complementary. China is a big energy importer but has rich experience in developing the manufacturing industry. Saudi Arabia has rich oil and gas resources and metal mineral reserves, but the level of processing and manufacturing is low.
The strong complementarity of the economic structure has enhanced the depth of cooperation between China and Saudi Arabia, and the Saudi Public Investment Fund has increased its overseas investment layout in recent years, which is expected to benefit some Chinese industries.
Which industries are beneficial?
1. E-sports racetrack, a test game.
Game e-sports and leisure consumption industry are recent investment hotspots in Saudi Arabia. On February 16th, PIF entered the Chinese game market for the first time through its subsidiary SavvyGamesGroup, investing US $265 million in e-sports 's Hero Sports VSPO supported by Tencent, becoming the single largest shareholder of VSPO.
In addition to China's game market, PIF is also actively laying out overseas:
Invested 5% of Nintendo in Japan in May 2022, and gradually increased its stake to 7.08% in 2023
In June 2022, he invested in EmbracerGroup, a Swedish game company, and acquired an 8.1% stake in the company worth US $1 billion.
On January 31, 2023, it acquired all the assets of AMC Entertainment in Saudi Arabia; on February 10, 2023, it announced an investment of US $266 million to develop an entertainment center in cooperation with Warner Brothers.
In this regard, the analysis of Oriental Securities pointed out:
Measures such as the establishment of a wholly-owned subsidiary of the Saudi Public Investment Fund to specialize in games and the acquisition of equity stakes in foreign game companies demonstrate the importance Saudi Arabia attaches to the development of the game e-sports and leisure consumption industry.
Chinese game e-sports companies rely on large Internet companies with fast growth and strong innovation ability. Saudi capital entering the Chinese market is of great significance to promote the internationalization of Internet enterprises.
Photovoltaic may become an important industry for Saudi Arabia to invest in China.
Secondly, the three areas with great potential for cooperation between China and Saudi Arabia are energy, infrastructure construction and manufacturing industries.
Oriental Securities pointed out that photovoltaic may be an important industry for Saudi Arabia to invest in China in the future, and the deepening cooperation in the energy field between the two countries will bring economic benefits to both sides.
Since 2017, Saudi Arabia has launched the National Renewable Energy Plan (NREP) as part of Vision 2030, which aims to achieve the installation of 58.7GW for new energy generation by 2030, accounting for 50% of the total installed capacity, of which photovoltaic power generation accounts for the first 40GW of new energy.
In 2022, China's total installed capacity of renewable energy exceeds 1200GW, hydropower, wind power, solar power and biomass power generation all rank first in the world, and the installed capacity of solar photovoltaic is developing rapidly.
3. Technology is expected to become a new blue ocean of investment.
Finally, technology companies are expected to become a new blue ocean of investment. Through the analysis of the position of the Saudi public investment fund by Oriental Securities, we can see that its overseas layout has a distinct investment style, that is, it prefers growth-oriented innovation-driven enterprises.
Oriental Securities believes that:
Compared with Europe and the United States, Chinese science and technology enterprises have the advantages of relying on a larger number of users and paying attention to cost control, and are expected to attract more capital and enhance their international competitiveness in the future of deepening cooperation between China and Saudi Arabia.
This article is mainly extracted from Oriental Securities "Saudi Public Investment Fund (PIF) acceleration of China's layout will benefit which industries?" "
Edit / Somer