Saudi’s US$700 billion wealth fund is a fan of Alibaba, Pinduoduo, Flat Glass stocks as Middle East-China ties spur new deals

The Public Investment Fund had US$35 billion bets on 52 stocks in its US-listed equity portfolio in March, including Alibaba, PDD, Coupang and Sea
Other filings in Hong Kong reveal its equity stakes in solar panel maker Flat Glass Group and in AI software developer SenseTime

US-listed Chinese stocks

Jiaxing Li

Published: 7:30am, 23 Jun 2023

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As China turns westwards to strengthen Middle Eastern ties, investors in the oil-rich states are starting to garner equity stakes in China’s leading tech companies, while US fund managers focus on their home market.

CYVN Holdings, backed by the Abu Dhabi government, is spending more than US$1 billion to take a 7 per cent stake in Nio, by picking up US$738.5 million worth of new shares in the Shanghai-based Chinese EV start-up and a smaller block from a Tencent Holdings affiliate.

The deal obscures under-the-radar investment over the past two years by Saudi Arabia’s Public Investment Fund (PIF), which manages US$700 billion of assets and is a fan of some of the industry-leading technology companies in China and Asia.

The sovereign wealth fund has amassed more than US$1 billion worth of stakes in at least five companies including Alibaba Group Holding, the owner of this newspaper, rival e-commerce operator PDD Holdings, and biotech firm BeiGene, according to US and Hong Kong exchange filings.

“The Chinese internet platforms are a no-brainer for fundamentals-driven investors,” said Vivian Lin Thurston, a China-focused equity fund manager at Chicago-based William Blair Investment Management. “The fundamentals are pretty favourable, yet valuations have become so attractive.”

The stock market links come into focus as Beijing pivots to the Middle East to strengthen bilateral ties, while Hong Kong’s government and business leaders attempt to grease two-way investment and capital flows. All this comes as US investors have become skittish and are retreating from China’s stock market as its post-pandemic recovery runs out of gas.

Fund managers lose confidence in China’s economy and stock returns, survey shows

China could receive at least US$1 trillion of investment from a pool of US$10 trillion assets amassed by sovereign funds the region by 2030, Nicolas Aguzin, CEO of Hong Kong Exchanges and Clearing, said on June 14, repeating his estimate given at the 10th Arab-China Business Conference in Riyadh this month.

PIF did not immediately reply to email requests seeking comment on its bets on Chinese stocks.

The wealth fund is at the centre of Saudi’s ambition to diversify its oil-oriented economy and project its influence around the world. The fund aims to grow its assets beyond US$1 trillion by 2025 and become the “world’s most impactful investor,” according to its annual report.

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The fund, which opened an office in Hong Kong in February, owned shares in Alibaba, Pinduoduo owner PDD and BeiGene with a combined market value of US$263 million at the end of March, according to its 13F disclosure, having first acquired them in late 2021.

The three stocks formed part of its US$35.5 billion public equity portfolio of 52 listed companies on March 31, which also included stakes in regional e-commerce platform operators Coupang of South Korea and Sea Limited of Singapore.

The fund lifted its stake in Flat Glass Group, a solar-panel maker based in China’s eastern Zhejiang province, to more than 5 per cent, according to a stock exchange filing in July last year. The stake is worth about US$75 million, after the stock surged 38 per cent this year.

A solar-panel factory owned by Flat Glass Group in Zhejiang province, China. Photo: Company website

Through its link with SoftBank Vision Fund, the sovereign wealth fund also has an indirect 14 per cent ownership of SenseTime, China’s biggest AI software developer. That stake, however, has lost a big chunk of its value, having fallen 45 per cent from its December 2021 stock listing price.

Global investors looking at China have picked the same stocks. Scion Capital Management, run by the “Big Short” investor Michael Burry, bulked up its stake in JD.com by over 200 per cent and doubled his bet on Alibaba last quarter, making the pair the biggest holdings in the fund.

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Singapore’s state investment company Temasek Holdings has also boosted its stake in China’s largest two e-commerce platform operators.

Chief Executive John Lee Ka-chiu met PIF’s deputy governor during his weeklong trip to the Gulf in February. The city signed six bilateral deals with Saudi Arabia, pledging to boost investment and investor confidence of investors on both sides as US funds withdrew.

US investors have little appetite for Chinese stocks and allocations have dwindled over the past three months, according to a Bank of America survey, as the economy struggled and political tensions worsened from the Trump-era trade war to the “spy-balloon” incident. Hong Kong needs a “Middle East strategy,” an expert said.

“There is a lack of capital flow coming from the US, which represents the biggest and the deepest pool of capital in the world,” Catherine Leung, chairperson of the Chamber of Hong Kong Listed Companies, said at the SCMP China Conference. “We need to be really proactive in finding other sources of capital.”

Additonal reporting by Yulu Ao

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