Destination Hong Kong: Middle East Countries Diversifying Their Investments

Hong Kong has a strong, long-standing and ever-growing relationship with the Gulf Cooperation Council, and it will continue to strengthen economic ties, foster collaboration, and attract more businesses from the region to tap into the mainland and the broader Asia-Pacific countries, says a senior official.

Charles Ng, Associate Director-General of Investment Promotion at Invest Hong Kong (InvestHK), said world's one of the top three leading financial centres is committed to deepening economic relations with the region's dynamic market - the UAE and Saudi Arabia, by increasing co-operation in finance, trade, and investment in coming years.

“We are eager to explore opportunities to enhance our presence in the region, including leveraging platforms like the Economic and Trade Office in Dubai. This office serves as a vital hub for fostering economic collaboration, and we see it as a strategic avenue to deepen our connections with the UAE and the wider Middle East,” Charles Ng told Khaleej Times during an interview in Dubai.

Charles Ng, during his visit to Saudi Arabia and the UAE, participated in various high-level business roundtables, bringing together representatives from prominent businesses, family offices, and investors. He also met representatives of leading Middle Eastern companies and discuss how establishing a presence in Hong Kong can drive their global expansion strategies.“We will continue to strengthen our regional footprint to connect global capital with opportunities in Asia and beyond. We are enthusiastic about the potential to work more closely with governments, financial institutions, and companies in the Middle East to facilitate investment flows and market access,” he said.

He said Hong Kong has developed strong economic and trade relations with the UAE and Saudi Arabia and now looks at expanding in presence in other GCC countries - Qatar, Kuwait, Oman and Bahrain - in addition to Egypt in North Africa.

Expanding Recognised Stock Exchange network

Charles Ng said Hong Kong, an international financial centre, and one of the world's leading financial hubs, has long been celebrated for its connectivity and strategic location, bringing East and West together for finance, business, investment and more.

“Our local bourse HKEX is committed to strengthening its position as a global financial hub by enhancing connectivity with key markets, such as the addition of Tadawul as a Recognised Stock Exchange (RSE) in 2023. This step has indeed made cross-market fundraising more attractive for Saudi-listed companies seeking secondary listings in Hong Kong, and we are proud of the opportunities this creates for collaboration and capital flows.”

A year later in July 2024, he said HKEX expanded the list of RSEs to 20 across 17 countries by adding the Abu Dhabi Securities Exchange (ADX) and the Dubai Financial Market (DFM), enabling issuers with a primary listing on those exchanges to apply for a secondary listing in Hong Kong and demonstrating HKEX's efforts to help Middle Eastern companies tap into Hong Kong's vibrant capital markets.

“We will continue to explore further opportunities to deepen our relationships with stock markets across the Middle East, including those in the UAE to foster mutually beneficial arrangements with these and other regional players,” he said.

“As part of its commitment to financial diversification, the city has developed a supportive platform for Islamic finance, including sukuk issuance and tax law amendments to ensure a level playing field with conventional bonds and the successful launch of three government sukuk. It continues to welcome more Islamic financial institutions and products to leverage Hong Kong's international financial platform and tap into opportunities across Asia and the Mainland.”

New Products to Channelise Investment

Charles Ng said a wide range of new products are being brought to market to channel investment flows between Hong Kong and the Middle East and highlighted some of them below:

Exchange-Traded Funds (ETFs): Hong Kong has seen the listing of a Saudi-focused ETF, while Saudi Arabia has listed ETFs tracking Hong Kong stocks. These ETFs facilitate two-way capital flows and increase financial connectivity between the regions.

Cross-Region Investment Products: Building on increased dialogue and connectivity, new financial products are being developed to channel investment flows between Hong Kong and the Middle East. This includes expanding the range of cross-listings and fintech collaborations.

Islamic Financial Products: Hong Kong continues to develop its platform for Islamic finance, including sukuk issuance, to attract more Islamic financial institutions and products. This supports the diversification of investments in the Middle East.

Joint Investment Funds: The Hong Kong Monetary Authority and Saudi Arabia's Public Investment Fund have agreed to establish a $1 billion fund to support companies expanding into the Middle East. This fund focuses on sectors like manufacturing, renewable energy, and fintech.

Attracting Family Offices

Charles Ng said Hong Kong recently ranked third in the Global Financial Centres Index, with overall scores catching up to that of the champion New York.

“In particular, we ranked first globally in 'Investment management', 'Insurance' and 'Finance'. In fintech, we leapt by five places to fourth in the world,” he said, and adding that Hong Kong remains one of the world's prime wealth management centres, managing approximately $4 trillion in assets.

“The number of family offices in our city has gone beyond 2,700 with half of them managing assets exceeding $50 million. Hong Kong is expected to become the world's largest cross-border wealth management hub between 2027 and 2028. This year, we seek to further enhance the tax concessions for funds and single-family offices.”

Charles Ng also highlighted some of the salient features of investment strategy:

Diversification and Economic Transformation: Middle Eastern countries are diversifying their economies away from oil, creating opportunities for investments in sectors like manufacturing, renewable energy, and digital infrastructure. Hong Kong's financial infrastructure and Mainland China's emerging industries will attract more investments from these funds.

Amid an increasingly complex global landscape and geopolitical uncertainties, countries in the Middle East are actively diversifying their investments. Hong Kong, as a global financial centre and a 'super connector' between the Mainland, Asia, and the rest of the world, is uniquely positioned to support this shift.

Under the 'one country, two systems' principle, our city offers a robust legal system, free flow of capital and information, and internationally aligned regulations.

Beyond finance, Hong Kong is also a hub for trade, logistics, innovation and professional services. It serves as a gateway for Middle Eastern partners to tap into the mainland and the broader Asia-Pacific region.

Financial Market Integration: The launch of ETFs tracking Saudi companies in China and potential listings of Hong Kong-focused ETFs in the Middle East will enhance financial market integration to facilitate two-way investment flows and deepen financial cooperation between the regions.

Strategic Partnerships: Initiatives like the Belt and Road Initiative and collaborations between Hong Kong and Middle Eastern entities will continue to foster strategic partnerships. These partnerships will drive innovation and growth across regions, supporting the expansion of Middle Eastern investments in China and Hong Kong.

Growth Opportunities: The next five years will see significant growth in investments as Middle Eastern sovereign wealth funds increasingly focus on Asia, particularly China and Hong Kong. The regions' strong economic fundamentals, coupled with the diversification strategies of Middle Eastern economies, will ensure a robust and expanding investment trend.

“Hong Kong, with its advanced financial infrastructure and robust regulatory environment, is at the forefront of this transformation. It has already made history by issuing the world's first tokenised government green bonds in 2023, followed by a groundbreaking multi-currency issuance in 2024.”

Collaboration with Mideast

Charles Ng said Hong Kong has a clear vision to increase collaboration with the Middle Eastern countries in general and the GCC state in particular. He highlighted below five key points to boost cooperation between the two strategic regions:

Deepening Financial Ties: Hong Kong and Middle Eastern countries are set to enhance their financial collaboration, leveraging Hong Kong's strong capital market to support the GCC's economic diversification efforts. This includes facilitating fundraising for infrastructure projects and fostering two-way investment flows.

Expanding Trade and Investment: InvestHK's recent visits to the Middle East aim to strengthen economic ties and attract more businesses from the region to invest in Hong Kong. This will further enhance trade and investment opportunities between Hong Kong and the GCC.

Infrastructure and Innovation Projects: Collaboration in sectors like logistics, AI, big infrastructure projects and manufacturing is expected to grow. Hong Kong can assist Middle Eastern countries in these areas, creating mutually beneficial opportunities.

Belt and Road Initiative: Hong Kong's participation in the Belt and Road Initiative will continue to foster greater connectivity and economic opportunities with Middle East region. This initiative supports policy coordination, infrastructure connectivity, and financial integration.

Strategic Partnerships and Agreements: The establishment of new economic and trade offices, along with ongoing discussions for investment agreements, will further solidify partnerships between Hong Kong and Middle Eastern nations. These strategic moves will drive innovation and growth across regions.

HONG KONG - A GATEWAY TO CHINA

Charles Ng said Hong Kong's role as a gateway to China's capital markets is undeniably vital, serving as a super connector between mainland China and global economies through its unique legal and financial framework, which channels roughly two-thirds of China's direct investments.

Unique Position as a Super Connector: Hong Kong serves as a bridge between mainland China and global markets, leveraging its status as a Special Administrative Region with a distinct legal and financial system. This facilitates seamless capital flows, with about two-thirds of China's inward and outward direct investments historically channeled through Hong Kong.

Stock Connect Programme Driving Integration: The Shanghai-Hong Kong Stock Connect (launched 2014) and Shenzhen-Hong Kong Stock Connect (launched 2016) have revolutionised cross-border equity flows. As of April 2025, there are over 2,300 companies listed on the Main Board. In March 2025 that southbound flows - Chinese capital moving outward through Hong Kong - represent the biggest opportunity for the city's markets. Between 20 per cent and 30 per cent of Hong Kong's stock market turnover comes from mainland China via Stock Connect.

Wealth Management Connect Boosting Participation: Launched in 2021, the Cross-boundary Wealth Management Connect in the Greater Bay Area saw Chinese investor accounts surge. As of the end of November 2024, the number of individual investors participating in the cross-boundary WMC in the GBA has risen from 73,400 in February to 126,300, marking a growth of over 72 per cent, according to data released by the People's Bank of China. It is worth noting that Hong Kong remains Asia's largest hub for cross-border wealth management and is poised to overtake Switzerland as the world's leading centre by 2027.

Bond Connect Enhancing Fixed-Income Access: The Bond Connect programme has enabled mainland institutional investors to tap offshore bonds via Hong Kong. This has boosted liquidity in Hong Kong and US dollar-denominated bond markets, reinforcing the city's fixed-income connectivity.

Robust Offshore RMB Hub: Hong Kong handles approximately 80 per cent of global offshore RMB payments (January 2025). Its RMB liquidity pool, though fluctuating, remains a cornerstone for China's currency internationalisation, facilitating capital flows in and out of the mainland.

“Ultimately, we complement Mainland China's vast market opportunities. Hong Kong's identity as a major international financial centre, bridging the East and the West, remains a huge draw - particularly for families seeking both cross-border investment potential and access to global networks in a cosmopolitan city that is a beacon of arts and culture and has so much to offer,” Charles Ng said.

ALL ABOUT HONG KONG

> World's 7th largest and Asia's 4th largest stock market by market capitalisation among exchanges at end-January 2025 ($4.5 trillion).

> The Hong Kong stock market recorded an average daily turnover of about $16.89 billion in 2024.

> Vibrant IPO activities, raising $11.3 billion in 2024, fourth in the world and second in Asia. Continues to be one of the world's major listing platforms.

> Home to over 2,700 single-family offices (end-2023).

> Asia No.1 hedge fund base (end-February 2025).

> One of the most open insurance markets in the world, with over 150 authorised insurers and six of the world's top 10 insurers operating in Hong Kong.

> About 70 of the world's 100 top banks operate in Hong Kong (as of end-February 2025).

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