Over the weekend, a piece of news shocked the real estate industry, and quickly escalated in early trading this morning.

China Aoyuan in the Hong Kong stock market surged immediately at the opening, with the intraday increase peaking at nearly 150%! This even led to a continuous rebound in mainland real estate stocks.

What kind of news triggered such a huge price shock in the stock market?

Long-established Cantonese property developers welcomed their 'White Knights', a Middle Eastern investment institution (Multi Gold Group Limited). According to the agreement, after the transfer is completed, Multi Gold will become the single largest shareholder. Following the rescue of Wang Jianlin's Wanda Commercial Management by institutions such as Abu Dhabi in the first half of the year, this new deal is providing some positive feedback to the still struggling real estate market and companies.

Behind all this, it is Middle Eastern tycoons buying assets in China.

Their industrial investments have reached into the domestic real estate chain, and what does this depth mean?

01

Although not as famous as sovereign wealth funds like Abu Dhabi and Kuwait Investment Authority, Multi Gold is also a professional investment institution in the UAE, with influential local family members in the management structure.

The sole director and ultimate beneficial owner Alobeidli of the fund has extensive experience in real estate investment in the UAE, having previously served as CEO of many companies, with a background closely related to real estate.

Akcome New Energy Technology was established in 2006, headquartered in Hangzhou, Zhejiang Province. The company was originally engaged in PV aluminum frame and PV power station construction and operation, and was listed in 2011. In 2016, the company's business layout extended to battery components, and its production capacity began to accumulate, making it a well-known component supplier in the industry.

The main highlight of this transaction is that with the fund becoming the largest single shareholder of the company, Alobeidli will join the board of directors and take the position of chairman. While Guo Ziwen, who founded Aoyuan 28 years ago and was the original controlling shareholder, will relinquish operational control.

How did China Aoyuan end up like this? Nowadays, the real estate market situation is obvious to everyone. Private enterprises, no matter how dominant they used to be in the past, are basically struggling to survive now.

In 2019, China Aoyuan's sales once exceeded 100 billion, ranking among the top 30 in national sales, enjoying a round of industry dividends. However, the subsequent downward cycle plunged the company into a situation of insolvency, leading to the stock being suspended for 17 months since April 2022.

In the second half of last year, after various negotiations, China Aoyuan's $6.1 billion offshore debt restructuring plan was finally approved, becoming another troubled real estate enterprise after Sunac.

Although the net assets have temporarily increased and the debt ratio has temporarily decreased, the cash reserve is still very weak. In the first half of the year, revenue decreased by 56.9%, and excluding restructuring gains, the net income was actually a loss.

The current China Aoyuan has just survived a dangerous period, which does not mean it is back on track. However, at this time, the management has handed over this mess to Middle Eastern tycoons to take over.

Middle Eastern capital is choosing to bet on the real estate industry at this time, and this year is not the first instance.

In March this year, the first sovereign wealth fund from the Middle East, the Abu Dhabi Investment Authority, along with Mubadala Investment Company, jointly with institutions like CITIC Capital and Tamar Capital Group, invested 60 billion RMB in assets under Wanda Commercial Group owned by Wang Jianlin in exchange for 60% of the shares.

At this time, Wanda Commercial Management failed to submit documents to the Hong Kong Stock Exchange for the fourth time, facing pressure from gambling funds, while the Middle Eastern tycoons made a move as a white knight.

Middle Eastern capital participates in the investment of Wanda Commercial Management Source: Wanda

On closer inspection, there are many examples of tycoons coming to the rescue, including last year's NIO's Li Bin, who successively secured strategic investments from Abu Dhabi totaling 3.3 billion US dollars, becoming NIO's major shareholder. Although Li Bin remains the actual controller, Abu Dhabi also retains the right to nominate directors.

The capital injection has greatly alleviated NIO's financial difficulties. Both the battery swap stations and automobile R&D, as well as product promotion, require capital investment. Although the stock price return is still negative, NIO's monthly sales volume has stabilized at over 20,000 vehicles, and the sub-brand LeDao targeting the mid to low-priced segment has been launched, enhancing the company's product portfolio.

This also indicates that the tycoons' money was not spent in vain, at the very least focusing on the execution they value.

However, China Aoyuan is not engaged in new energy, but in residential real estate. The organization has chosen to invest in China Aoyuan, and has already entered into management. Could this be another big move by Middle Eastern investors?

By the first half of the year, Aoyuan's total land reserve in the Guangdong-Hong Kong-Macao Greater Bay Area has reached approximately 5.76 million square meters. According to media reports, the Aoyuan board of directors may be exploring existing or future business collaboration opportunities. This fund may also seek to recommend real estate-related products from the UAE and the Middle East to potential Chinese buyers through this investment.

Think about Aoyuan, which used to have a market cap of over 30 billion, now at a low price, bought by Middle Eastern tycoons very cheaply. If the subsequent operation goes on the right track, the return space it can bring is very rich.

Looking from another perspective, from intensive industry investment to becoming a listed company's 'White Knight', the Middle Eastern buying spree is getting faster and faster, with more precise calculations and increasing focus on cooperation opportunities.

02

Nowadays, more and more Middle Eastern capital is setting up offices in China, bullish about the future long-term development of the Chinese market, investing in China, covering new energy, hard technology, biomedical, digital construction, and fine chemicals.

The goals are nothing more than to continue to enjoy China's economic growth, industry dividend, while filling their own development gaps through cooperation, seeking more inflow of resources.

Last year, the president of the Hong Kong Stock Exchange said that by 2030, the scale of Middle Eastern sovereign funds will grow by 150% from the current $4 trillion to $10 trillion, with over 10% to 20% of investments going to China.

Among the top ten sovereign wealth funds in the world, six are from the Middle East. Just since June last year, in a year, Middle Eastern sovereign wealth funds have increased their investment in China fivefold, up to $7 billion.

Both Abu Dhabi Investment Authority and Kuwait Investment Authority are particularly active in A shares. As of the end of the second quarter of this year, these two sovereign funds have newly become the top ten circulating shareholders of more than twenty listed companies.

Overall, Middle Eastern funds have a preference for A-share companies with high market value and visibility. The sectors they cover are more diversified, including not only energy, nonferrous metals, and internet-related fields as before, but also adding chains like biomedical, electronics manufacturing, and even real estate.

For example, in the first half of this year, Middle Eastern capital participated in investments in listed companies such as Rongsheng Petro Chemical, Fullink Technology, Zhejiang Dahua Technology, and Lenovo Group.

In addition to changes in shareholding, the cooperation between the upstream and downstream of the advantageous industry chains of the two countries is deepening. For example, in March this year, Saudi oil giant Saudi Aramco bought 10% of Rongsheng Petro Chemical for 24.6 billion and, according to the agreement, Saudi Aramco will supply 480,000 barrels per day of crude oil to the subsidiary of Rongsheng Petro Chemical for 20 years.

On September 11th, the cooperation between the two parties continued to progress, and Saudi Aramco and Rongsheng Petro Chemical discussed the acquisition of each other's subsidiaries, which can be seen as a deep integration from upstream oil resources to midstream refining. Among the four major private petrochemical giants, three have discussed cooperation with Saudi Aramco.

With the influence of Middle Eastern capital, cooperation between listed companies in various industries and entities from the Middle East is becoming increasingly frequent.

For example, recently Zhejiang Jiuli Hi-Tech Metals announced that its wholly-owned subsidiary signed a pipe supply contract with Abu Dhabi National Oil Company for approximately 92 kilometers of pipeline steel pipes, totaling about 0.592 billion euros (about RMB 4.6 billion), which is expected to contribute about 2.3 billion yuan in annual revenue.

In terms of logistics, last year Jitu Express became the 20th cross-border customs clearance and local delivery integrated operation organization in Saudi Arabia, officially entering the Saudi market and improving e-commerce delivery efficiency.

In the field of computers, Alibaba Cloud's Saudi joint venture has established two data centers in Riyadh, the capital of Saudi Arabia, and will further expand to set up 16 data centers in the Middle East, promoting the digital infrastructure development in the region.

These investment cooperations not only bring capital gains to Middle Eastern countries but also drive Chinese companies to export successful Chinese manufacturing experiences to the Middle East, resulting in a mutual exchange.

China's emerging industries, such as new energy, biopharmaceuticals, are still in a growth dividend period. Besides capturing the growth returns of these emerging industries from 0 to 100, Middle Eastern capital also hopes to introduce Chinese technological capabilities into their own market, complete economic structural transformation. Therefore, investing in the Middle East for overseas opportunities is also crucial.

As early as in 2016, Saudi Arabia introduced 'Vision 2030,' announcing its transformation into a diversified economy by 2030, no longer solely relying on oil revenue. Their main focus lies in businesses that can help improve the country's industry chain, bringing technology and talent for long-term development in Saudi Arabia to gain capital favor.

In the past year, the solar industry has taken a significant step forward.

Saudi government has adopted a partnership approach to jointly develop the local solar market with Chinese companies. For instance, this year companies like GCL Tech, TCL Zhonghuan, JinkoSolar, Jundaxin all announced plans to invest and establish factories in the Middle East, covering the entire solar industry chain, rather than just a single segment of offshore operations.

This also indicates a clear direction of future cooperation in the Middle East, turning investment attraction, localization operations into conditions for collaboration, aiming to complement each other's strengths and weaknesses, and achieve valuable resource sharing.

03

Overall, in recent years, Middle Eastern tycoons have expanded their presence in China, both in scale and depth.

It seems that Middle Eastern buyers have bottomed out, playing the role of a white knight.

However, for them, there are still differences in the real estate markets of the two countries. Policy and regulatory environments may not be consistent, so investors need to carefully consider the certainty of the reversal of the dilemma, as a misstep could lead to "discomfort".

Conversely, the same applies to Chinese companies going global, they need to pay more attention to the impact of policy changes on their operations. (End of text)