Financial Services Association, May 12 — The Middle Eastern tycoons have bought Chinese assets in a big way again.

Recently, along with the strong inflow of foreign capital, the trend of foreign capital has also been viewed by investors as an “investment weather vane.” With the disclosure of the first quarterly reports of listed companies, QFII capital trends known as “smart money” have also surfaced. The ones that have received the most attention are the top sovereign wealth funds, such as the Abu Dhabi Investment Authority and the Kuwait Investment Authority, which hold large numbers of A-share listed companies through the QFII channel.

Middle Eastern billionaires “buy buy buy” in A-shares

According to statistics from the global sovereign wealth fund data platform Global SWF, half of the world's top ten sovereign wealth funds in 2023 are from the Middle East, namely Abu Dhabi Investment Authority (ADIA), Kuwait Investment Authority (KIA), Saudi Public Investment Fund (PIF), Qatar Investment Authority (QIA), and Dubai Government Investment Corporation (ICD). When it comes to investing in the A-share market, Middle Eastern sovereign funds are even more “inhumane.”

According to Wind statistics, at the end of the first quarter of 2024, the Abu Dhabi Investment Authority held 27 A-share companies with heavy positions (appearing in the list of the top ten tradable shareholders), with a total market value of about 11.289 billion yuan, an increase of more than 1 billion yuan over the end of 2023.

In terms of individual stock holdings, the Abu Dhabi Investment Authority increased its holdings in 11 companies in the first quarter and added 8 new companies to the list of top ten tradable shareholders. The rest remained unchanged or reduced their holdings appropriately. The reduction in holdings was generally small. Among them, Tonghua Dongbao increased its holdings the most, which increased its holdings by 3.581,300 shares over the previous reporting period. The largest number of new purchases was BOE A, which held 33,800 shares as of the end of the first quarter.

In terms of industry preferences, the layout direction of the Abu Dhabi Investment Authority in A-shares mainly includes non-ferrous metals, pharmaceuticals, automobiles, etc. In terms of market capitalization, the most important stock is Zijin Mining. The Abu Dhabi Investment Authority has held heavy positions for several quarters: since it first appeared on the list of top ten tradable shareholders at the end of the fourth quarter of 2021, it has only temporarily withdrawn during the third quarter of 2022 and the first quarter of 2023.

Against the backdrop of the resource stock boom since February of this year, Zijin Mining, which is a leading non-ferrous metals company, has continued to rise. As of mid-April, stock prices have continuously reached record highs, and the Abu Dhabi Investment Authority also cut some positions in the first quarter and fell back to safety.

Another sovereign wealth fund, the Kuwait Government Investment Authority, is the world's first sovereign wealth fund. According to Wind data, at the end of the first quarter of 2024, the Kuwait Government Investment Authority had 30 A-share companies on the list of the top ten tradable shareholders, with a total market value of about 4,517 billion yuan.

In terms of holdings, in the first quarter of 2024, the Kuwait Government Investment Authority increased its holdings in 5 companies, added 11 companies' top ten tradable shareholders, reduced its holdings in 9 companies, and withdrew from the list of the top ten tradable shareholders of 11 companies. Among them, the individual stock that increased its holdings the most was Daimei shares, which added a total of 12.0753 million shares in the first quarter.

Judging from previous operations, pharmaceutical biotechnology was once the most popular sector of the Kuwait Government Investment Authority, but there has been a shift in recent years, with new companies entering and increasing positions in the first quarter mainly in the resource, energy, and automobile sectors.

Furthermore, the Middle East Sovereign Fund has recently moved frequently in China. On March 30, five investment institutions, Taimeng Investment Group, CITIC Capital, Ares Management's fund, the Abu Dhabi Investment Authority, and Mubadala Investment Company, held a signing ceremony with Dalian Wanda Commercial Management Group at the Shangri-La Hotel in Dalian and announced an injection of 60 billion dollars into Wanda. Of the 5 investment institutions, apart from CITIC Capital, the 4 foreign-funded companies have 2 Middle Eastern tycoons.

Middle East Sovereign Fund frequent survey during the year

In addition to buying A-shares with real money, compared to last year, the Middle East Sovereign Fund has also stepped up research on A-shares. According to Wind statistics, since the beginning of the year, the Abu Dhabi Investment Authority has investigated a total of 9 listed companies, covering fields such as new energy, medicine and biology.

Among them are popular pharmaceutical stocks such as Borui Pharmaceutical, Yunnan Baiyao, Samsung Healthcare, and New Industries. In terms of new energy, the Abu Dhabi Investment Authority has obvious layout intentions, and has investigated GAC Group, Keboda, Jingsheng Electromechanical, etc.

The Kuwait Investment Authority also investigated Haitian Ruisheng at the end of March. The sovereign fund also turned its investment vision to artificial intelligence, which is a hot topic of A-shares in recent years.

Overseas sovereign wealth funds allocate Chinese assets

In addition to Middle Eastern sovereign funds, other well-known foreign sovereign funds are also increasing their layout in the Chinese market.

Examples include Temasek Holdings (“Temasek”), Singapore's two major sovereign wealth funds, and the Singapore Government Investment Corporation (“GIC”). Both sovereign funds have been active in global capital markets for a long time, and have long been among the top ten in terms of asset management among global sovereign wealth fund managers.

According to the operating report, Temasek has allocated more than 20% of its portfolio to China for a long time, and GIC's portfolio has also gradually reduced its risk exposure in recent years, continuing to increase its allocation to the Asian region and reduce its allocation to the European market. However, most of Temasek's and GIC's investments in China are equity investments. While Temasek invests mostly in shares in the secondary market, GIC invests mostly in Hong Kong stocks, and is not serious about holding positions in A-shares in the secondary market.

According to Wind statistics, Temasek and GIC Heavy Industries have a total of 7 A-share companies in the list of top ten tradable shareholders, with a total market value of about 3,547 billion yuan. Among them, Aier Ophthalmology holds the most shares, with a total of 578.21,000 shares.

Compared with the end of 2023, Temasek withdrew from the list of the top ten shareholders of Midea Group and Tiger Pharmaceuticals in the first quarter of this year, and also reduced its positions with the remaining 4 companies; GIC withdrew from the list of the top ten tradable shareholders of Arowana and Shennan Circuit. It added Huaming Equipment, increased its positions at Pelaea, and slightly reduced Hengli Hydraulic's position.

The Macau Monetary Authority held a total of 21 A shares, with positions of 3.243 billion yuan, an increase of 350 million yuan compared to the previous reporting period. Among them, 10 new shares were added in the first quarter, including COFCO Sugar, Mingyang Electric, Ma Yinglong, Kanghong Pharmaceutical, Jinkong Coal, Jin Chengxin, Juneyang Airlines, Hengshuai Co., Ltd., Guizhou Sanli, and Daimei Co., Ltd. It increased its holdings in 6 stocks of China Galaxy, Yankuang Energy, Xinji Energy, Songyuan Co., Ltd., Kunming Pharmaceutical Group, and Superstar Technology. It mostly holds individual stocks in pharmaceuticals and energy.

edit/emily