As the calendar turns to the end of October, the spotlight in the financial world is on the burgeoning relationship between Middle Eastern investments and the Chinese stock marketThis development is illustrated by the launch of Saudi Arabia's first investment in a China-dedicated Exchange Traded Fund (ETF), which is set to hit the market with a phenomenal fundraising target of 10 billion Hong Kong dollarsThis follows a string of successes for Saudi ETFs, including the debut of the largest Saudi ETF on the Hong Kong Stock Exchange last November, and the introduction of two additional Saudi ETFs on the Chinese mainland in July, both of which have attracted significant interest from investorsThis sequence of events marks a profound strengthening of cooperation in capital markets between China and the Middle East.

Simultaneously, as the third quarter financial reports of companies listed on China's A-share market emerge, the influence and flow of Middle Eastern funds become increasingly pronounced

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Reports suggest that numerous firms are experiencing strategic investments from the Abu Dhabi Investment Authority (ADIA) and the Kuwait Investment Authority (KIA), highlighting the active engagement of these sovereign wealth funds in China's dynamic financial landscape.

As October 31 approaches, the disclosure of third-quarter reports for 2024 is winding downOut of the 5,355 listed companies in Shanghai, Shenzhen, and Beijing, only four are anticipated to delay their financial disclosuresOver a thousand companies have successfully completed their formal reports, with over a hundred of these revealing that QFII (Qualified Foreign Institutional Investor) entities are among their top ten shareholdersSpecifically, the Middle Eastern capital, which has consistently favored A-shares, has seen the ADIA making notable appearances in the major shareholder lists of eight A-share companies, while the KIA has acknowledged shifts in its holdings in four of its heavy-hitting stocks.

Throughout the third quarter, the recognition of A-share companies by Middle Eastern funds remains robust, showing an overall trend of increasing holdings

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For example, within the eight heavily-invested stocks reported by the ADIA, five have seen an uptick in holdings compared to the end of the second quarterNotably, the biotechnology firm Health Yuan and the agricultural firm Hai Da Group have each received increases in their shared stocks, surpassing 500,000 eachAdditionally, internet concept stock Tonghuashun has emerged as a new investment target for the fund.

Conversely, published financial results indicate that the only companies that have seen reductions from the ADIA are Zijin Mining and Tonghua Dongbao, with adjustments in their holding sizesThe ADIA also stepped back from its position among the top ten shareholders of Jerry HoldingsNonetheless, analysts suggest the possibility of a passive exit scenario for the ADIA, as the end of the third quarter saw Taikang Life Insurance Company making a significant entry as the tenth largest shareholder, surpassing the ADIA's previous holdings of 5.6153 million shares with its own stake.

In contrast, the KIA, which has fewer equity positions, has stated that among its four publicly known major stocks, Senmikirin saw an additional increase in holdings

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Conversely, Shanjin International broke into the portfolio during this reporting period, while Beitan and Shenzhen Airport demonstrated a status of unchanged holdings in comparison to the previous reporting cycle.

Meanwhile, two previously notable investments from the Kuwait Investment Authority, Tuobang Coand Zhenghai Biotechnology, are conspicuously absent from the latest major shareholder lists, suggesting either reduced activities or a passive exitThe dynamism of these sovereign funds accentuates their strategies and perspectives towards Chinese equities.

These trends are reflective of a growing appetite for growth among qualified foreign investorsMiddle Eastern funds are known to prioritize potential developmental success within their investments in A-sharesRecent quarterly reports highlight that out of twelve heavily invested stocks, eleven reported profitable outcomes during the reporting period

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Notably, nine of these companies achieved net profits, surpassing their year-on-year figures, with five entities showcasing impressive growth rates greater than 50%. When analyzing revenue growth alongside net profits, six companies depicted simultaneous upward momentum across both financial indicators.

For instance, one transportation company reported revenue of 3.465 billion yuan, reflecting a yearly growth of 13.92%, while achieving a staggering increase of 99.38% in net profit attributable to its parentThis company not only maintained its attraction with Middle Eastern investments but also caught the eyes of domestic pension funds and various public welfare funds.

Another notable case comes from a metal resources firm, benefitting from the sustained high prices of precious metalsIts performance metrics display significant advancements across all areas, setting historical highs with revenue of 12.071 billion yuan—an increase of 70.14% year-on-year—along with a net profit of 1.727 billion yuan, marking a 54.46% increase

Across individual quarters, this company recorded consistent sequential growth, including a remarkable revenue jump of 49.17% in the third quarter alone.

In parallel, the Middle Eastern interest in Chinese assets continues to flourish, with additional revelations surfacingSet to debut on the Saudi exchange on October 30, the Albilad CSOP MSCI Hong Kong China ETF emerges as the first ETF focused on Chinese Hong Kong stocksThis ETF, designed by Bank Albilad's investment company, plans to channel a staggering 95% of its resources into Southern Eastern MSCI's selective Hong Kong ETF, presenting an efficient and convenient investment vehicle for Saudi investors.

According to Southern Eastern Asset Management's statement via its official channels, as of October 22, the ETF had already surpassed a scale of 10 billion Hong Kong dollarsIts portfolio boasts heavyweight stocks such as Meituan, Techtronic Industries, China Shenhua, Xiaomi Group, Anta Sports, Baiyue Biopharmaceuticals, Haier Smart Home, Nongfu Spring, Shenzhou International, and Innovent Biologics.

Upcoming developments in this area include the anticipated launch of the world's largest Saudi ETF on the Hong Kong Stock Exchange on November 29, 2023, followed by the introduction of additional Saudi ETFs on the Shanghai and Shenzhen stock exchanges in July 2024. The launch of Saudi Arabia's inaugural China-dedicated ETF marks a definitive step towards deeper financial ties between the regions.

This growth trajectory not only showcases the increasing appeal of Chinese markets to Middle Eastern investors but also holds significant implications for the global investment landscape as foreign institutional investments continue to shed light on emerging opportunities within the A-share market.

(The stocks mentioned in this article are provided solely for analytical purposes and do not constitute investment recommendations.)