Hong Kong, Abu Dhabi exchanges strengthen market connections

In a bid to bring two financial hubs closer together, Hong Kong’s HKEX stock market and Abu Dhabi’s ADX signed an agreement to expand cooperation and strengthen links.

The deal includes potential initiatives in exchange-traded funds, ESG-focused products and cross-listings, Reuters reports.

The Hong Kong exchange last year granted the ADX and Dubai Financial Market the status of Recognized Stock Exchanges and is also preparing to open a representative office in Saudi Arabia.

HKEX CEO Bonnie Y. Chan said the partnership seeks to “unlock new investment opportunities, strengthen market infrastructure, and meet the evolving needs of global issuers and investors.”

Gulf tourists in Hong Kong spend more money than ever

Hong Kong is rolling out the red carpet for Saudi and Emirati travelers with a love of luxury.

Armed with data that show visitors from Saudi Arabia and the UAE are likely to spend some $1,450 a day when they visit, Hong Kong tourism officials have launched a new campaign aimed at the Gulf to promote their plush hotels, Michelin-starred Cantonese restaurants and South China Sea landscapes.

At a time that political friction weighs on Chinese ties with the U.S. and Europe, Hong Kong – classified as a Special Administrative Region of China with limited autonomy – is broadening its focus and finding a wealthy audience in the GCC region eager to explore Asia in style.

“Since 2010 we have watched the GCC market grow, especially Dubai, which is now a global capital,” Henry Wong, Director of Trade Development at Hong Kong Tourism Board (HKTB), told The Circuit. “We believe it’s the right time to focus” on Saudi Arabia and the UAE.

The new attention to the Gulf was evident at the Arabian Travel Market conference in Dubai that took place in May, where the HKTB set up its largest booth ever with representatives from more than 30 hotels, travel agencies and cultural institutions.

In October, the tourism agency will sponsor a trade mission to Riyadh and Dubai, bringing in representatives from Hong Kong hotels and other businesses for networking with the Gulf travel industry.

During the travel conference in May, Hong Kong officials signed draft agreements with the UAE government to expand tourism within the GCC market and with the dnata Travel Group to strengthen partnerships with Gulf airlines and travel agencies. The UAE also signed a preliminary agreement with the China Cultural Center to facilitate air travel to China and organize promotional trips to familiarize UAE travel agents with the world’s second most populous country.

Among the attractions being promoted this year are the Palace Museum, the West Kowloon Cultural District, M+ and the Art Basel Hong Kong art fair, Becky Ip, Deputy Executive Director of HKTB, told The Circuit

“GCC travelers used to travel more to Europe and even Thailand and Malaysia,” she said. “Now I think they are prepared to go beyond these places and see more of the east.”

The Daily Circuit: SoftBank courts UAE in Tokyo + Dubai’s mega car market

👋 Hello from the Middle East!

Today in The Daily Circuit, we’re looking at Dubai’s plans to build the world’s largest car market, the Saudi Public Investment Fund’s latest deals in Turkey and Hong Kong, a new finance team at the Egyptian Cabinet table and the Michelin stars awarded to five more Dubai restaurants. But first, the UAE and Japan talk tech in Tokyo.

The UAE’s power man met with the head of SoftBank on Thursday as the Japanese firm is reportedly looking to make investments at the intersection of energy and artificial intelligence. 

Dr. Sultan Al Jaber, who in addition to serving in the Cabinet as Minister of Industry and Advanced Technology is also CEO of state-owned oil company ADNOC and Chairman of alternative energy firm Masdar, met with SoftBank CEO Masayoshi Son in Tokyo. The pair discussed “trends in the energy, industry and advanced technology sectors, highlighting the importance of increasing strategic investments in these areas to enhance sustainable economic growth,” according to an Instagram post from the Ministry of Industry and Advanced Technology.

Abu Dhabi and SoftBank have a history: The capital’s sovereign wealth fund Mubadala was an anchor investor in Son’s Vision Fund I, ultimately writing down its stake as the fund’s big play for WeWork went belly up. SoftBank’s fortunes have since reversed with Arm. The U.K. chip designer it acquired in 2016 has more than doubled its market capitalization to about $170 billion since going public last year in New York.

The Information reported on Thursday that SoftBank is looking to borrow up to $10 billion from banks to enable investments in energy-related projects. The data centers that power AI are hugely energy-intensive and face growing demand. SoftBank is also exploring ways to gain access to a large volume of Nvidia’s graphics processing units, the building block of AI development, the Silicon Valley publication reported. 

Al Jaber also met with Japanese Prime Minister Fumio Kishida as well as Hayashi Yoshimasa, Chief Cabinet Secretary; and Taro Kono, Minister of Digital Transformation. Alongside UAE Minister of Foreign Trade Thani Al Zeyoudi, he met with Ken Saito, Japan’s Minister of Economy, Trade and Industry of Japan to discuss strengthening trade and investments in energy and advanced industry with the world’s fourth-largest economy.

AUTOMOTIVE MEGAMARKET

Dubai is planning to build what its leaders describe as the world’s largest and most advanced car market. Officials signed a contract with DP World on Thursday to build and manage a 20 million square-foot facility connected to 77 international ports that is expected to generate an estimated $3.8 billion in sales. “The new market will become a global hub that offers commercial services and logistics and financing solutions” for the automobile industry,” Sheikh Mohammed bin Rashid, Ruler of Dubai and the UAE’s Vice President and Prime Minister, said in a statement released on Thursday. The new compound – eight times the size of the city’s current car market – will enable buying, selling, registration and banking within its domain. It will also host major conferences and events for the international automotive industry.

SCORING RISK

Israel and Saudi Arabia are at the greatest risk of defaulting on their debt among emerging markets tracked by Goldman Sachs. Over the first half of 2024, Israel showed the sharpest decline in the investment bank’s tally of sovereign-risk scores, as war in Gaza created a drain on public finances, Bloomberg reports. Saudi Arabia’s massive spending on Neom and other mega-projects mapped out in Crown Prince Mohammed Bin Salman’s Vision 2030 economic blueprint led to the kingdom’s drop in the risk scorecard, according to the July 1 Goldman Sachs report. Reduced oil revenues led to lower scores for other Arab Gulf countries including Oman and Bahrain, Bloomberg said. Goldman takes into account economic, governance, fiscal, external and monetary metrics to come up with its overall risk scores.

Public Investment Fund: PIF-owned Saudi Arabian Military Industries signed draft agreements with Turkish defense contractors Baykar, Fergani Space and Aselsan to develop products and services together at facilities within Saudi Arabia. Meanwhile, the fund’s expansion in Asia continues as the PIF on Thursday signed a non-binding preliminary agreement with Hong Kong conglomerate ChaoShang for a potential $500 million investment aimed at providing the company with convertible debenture and loan financing. The investment, which will be fully funded by the sovereign wealth fund, will be finalized over the next three months and back investments in industries like mining and healthcare.

ADQ: Abu Dhabi’s ADQ has listed a dual-tranche $2.5 billion bond on ADX. The notes were initially listed on the London Stock Exchange in April. The fund sold a $1.25 billion five-year portion at 80 basis points (bps) over US Treasuries and another $1.25 billion 10-year tranche at 90 bps over the same benchmark.

Lunate: The UAE’s $105 billion investment firm, which is backed by Abu Dhabi-based International Holding Co. and ADQ, and Daman Investments were authorized by The Ministry of Human Resources and Emiratisation and the Securities and Commodities Authority to launch employee savings funds that protect capital and comply with Islamic Sharia.

💵 Green Backing: ADNOC and the Japan Bank for International Cooperation have signed a $3 billion agreement for a green financing facility. ADNOC said the funding would support decarbonisation and energy transition initiatives. 

🌐 Potential IPO: Alpha Data, an IT services company based in the UAE is planning an IPO that would seek to raise about $200 million and is working with EFG Hermes and Emirates NBD Capital on the potential sale, Bloomberg reports.

🤖 Fiber AI: CogniFiber, an Israeli startup that processes data at the speed of light for artificial intelligence applications, raised $5 million in a funding round led by Chartered Group and Eastern Epic Capital.

🇲🇦 Pay Boost: Moroccan government and union negotiators reached agreement on a new contract that will provide a 50% salary increase and expanded health coverage for 1.1 million public employees.

🗣 Circuit Chatter

🚚 Overheated EVs: Amazon is trying to address the challenges to electric vehicles posed by the Middle East’s extreme heat as it accelerates use of EVs for its delivery fleet in the UAE, Prashant Saran, the company’s director of operations for Turkey, the Middle East and Africa, told The National.

🛂 Citizen Drive: Saudi Arabia has begun granting citizenship by royal decree to a number of scientists, medical doctors, researchers and entrepreneurs with unique specializations as it looks to attract talent to the kingdom.

🇬🇧 New Order: The financiers that populate the City of London and Mayfair, sometimes referred to as “Little Doha,” shunned the Conservatives on U.K.’s Election Day yesterday and are embracing their new Labour constituency, Bloomberg reported.

🏗️ Going Public: Oman’s state-owned logistics company Asyad Group has hired Jefferies Group and EFG Hermes as advisers and is planning an IPO for its subsidiary Asyad Shipping Co before the end of the year, Zawya reports.

🎞️ Film Drama: The terrorism charges against animated-film maker Abdulaziz Almuzaini, a U.S.-Saudi citizen who does work for Netflix, shows the possible limits of reform in Saudi Arabia, the Wall Street Journal reports.

🌍 Power Circuit

Egyptian President Abdel-Fattah el-Sissi led the first meeting of his new Cabinet on Thursday, declaring the importance of completing economic reform while “attracting and encouraging domestic and foreign investments.” Among the government’s new faces were Finance Minister Ahmed Kouchouk; Rania Al-Mashat, Minister of Planning, Economic Development and International Cooperation; and Hassan ElKhatib, Minister of Investment and Foreign Trade.

Emir of Qatar Sheikh Tamim bin Hamad Al Thani met with Russian President Vladimir Putin on the sidelines of the Shanghai Cooperation Organization summit in Astana, Kazakhstan.

The UAE sent a delegation to the summit in Astana to represent President Sheikh Mohamed bin Zayed that included Sheikh Saud bin Saqr Al Qasimi, Member of the Supreme Council and Ruler of the emirate of Ras Al Khaimah.

➿ On the Circuit

U.S. Congressman Josh Gottheimer (D-NJ) led a House Intelligence Committee trip to Israel and the UAE where he met with UAE Secretary-General of the Supreme Council for National Security Ali Al Shamsi; UAE Director of Signals Intelligence Agency Ahmed Al Dehaim and Executive Vice President of G42 Talal Al Kaissi.  

Hamad Al Ameri, CEO of Abu Dhabi-listed conglomerate Alpha Dhabi, said the firm plans to list some of its portfolio companies this year amid strong market performance, in an interview with The National.  

🎶 Culture Circuit

⭐ Star Power: Five restaurants have been added to Dubai’s growing list of Michelin-starred dining venues in the latest rankings for the emirate by the famed French gastronomic guide, announced on Wednesday. A total of 19 restaurants now boast the coveted stars, with four obtaining two-star rankings. Jason Atherton’s new restaurant Row on 45, which offers a 1,145 dirham ($312) tasting menu, was awarded two-stars just 10 months after opening, while Dubai institution Orfali Bros and Anne-Sophie Pic’s La Dame Pic received their first stars.

📷 Photo of the Day

🗓️ Ahead on The Circuit

July 2-Aug. 25, Riyadh, Saudi Arabia: Esports World Cup. An international competition for professional gamers with a $60 million prize pot. Boulevard City.

July 10-11, Riyadh, Saudi Arabia: Global EV and Technology Forum. The inaugural summit in Saudi Arabia bringing together policymakers, companies and investors focused on sustainable urban mobility solutions. Riyadh International Convention & Exhibition Center.

July 15-26, Granada, Spain: ADIA Lab International Summer School. A course of lectures and case studies to explore the critical role of trust and safety in AI, examining the ethical, technical and societal implications of AI applications. University of Granada. 

Aug. 12-15, Riyadh, Saudi Arabia: Saudi Food Expo. One of the kingdom’s largest trade shows for the food & beverage industry. Riyadh Front Exhibitions. 

Sep. 30-Oct. 2, Dubai, UAE: Future Hospitality Summit. The global conference for leaders in the hospitality industry expands this year at a new location with dedicated space for ESG planning, country pavilions and a larger exhibition area. Madinat Jumeirah.  

Alibaba delivers windfall to Saudi Arabia’s sovereign wealth fund

A rally this year on the Shanghai Stock Exchange has been a boon to Saudi Arabia.

The Public Investment Fund bought 153,000 shares in Alibaba during the first quarter of 2024, profiting from the stock’s 24% jump during the period, the Hong Kong-based South China Morning Post reports, citing disclosures by the PIF to the U.S. Securities and Exchange Commission.

By contrast, the kingdom’s sovereign wealth fund reduced its portfolio of U.S. stocks by about half to $18 billion.

“Investors have relinquished the wait-and-watch approach [for Chinese equities] in favor of building exposure on incremental signs of easing and wiped out the underweight allocation from prior months,” Bank of America strategists said in a note on Thursday, cited by the newspaper.

The MSCI China Index has surged nearly 28% since a January low, restoring over $2 trillion of value to Chinese companies listed on the mainland, in Hong Kong and New York, according to Bloomberg data. 

Gulf ties with Indian health care draw investors to Mideast alliance

TEL AVIV, Israel – When Hong Kong-based fund manager Sean Debow went hunting in India for promising health care investments in 2009, he became intrigued by the growing demand for knee and hip replacement surgery. Many private hospitals in New Delhi and Mumbai were filling beds for such elective operations with patients from the nearby Arab Gulf states who were struggling with obesity.

The trend in medical tourism that Debow discovered 14 years ago when he ran a small regional investment firm has fueled a significant part of his India strategy as CEO for Asia of Eurizon Asset Management, the Milan-based unit of Italy’s biggest banking group, Intesa Sanpaolo. With $416 billion under management, Eurizon invests in some of India’s biggest hospitals and pharmaceutical companies.

“I’ve been watching the sector grow,” Debow told The Circuit during an interview in Tel Aviv. “The accelerant has absolutely been the growth from the Gulf, whereby there’s this mutual trust between Indian health care companies, health professionals and people in the Gulf,”

The close ties between India and the Gulf states has in turn become a pillar of the regional trade alliance known as “I2U2” that was designed to promote cooperation among India, Israel, the United Arab Emirates and the U.S., following up on the 2020 Abraham Accords. Creating the quartet was among the foreign policy objectives that U.S. President Joe Biden sought to reinforce during his visit to Israel and Saudi Arabia last July. Health care is among the central components of the initiative, which also aims to promote investment in water, energy, transportation, space and food security.

Debow, a 56-year-old Canadian who is also chief investment officer for Eurizon Asia and has spent three decades managing money in the region, describes a synergy among the group’s four members in the health care market. It’s based on the wide-ranging U.S. leadership in the field, the UAE’s willingness to invest large sums of money, Israel’s innovative medical startups and India’s position as the world’s fifth-biggest economy with a population that is projected to surpass China’s this year, he said. Israel’s Teva Pharmaceutical Industries is the largest maker of generic drugs while India’s Sun Pharma is ranked No. 4.

Large asset managers such as Eurizon tend to own positions in excess of $100 million in companies they fund, though Debow declined to confirm the size or names of the firm’s investments in India

Betting on India’s health care industry, where he says “it would not be unusual to see 30% compounded growth for the next five years,” Debow said cooperation with the UAE, Israel and the U.S. is good for everyone.

Several Israeli and UAE hospitals have explored areas of cooperation since the normalization agreements were signed. Israel’s Sheba Medical Center formed a partnership with Bahrain’s King Hamad American Mission Hospital to share new techniques in surgery and telemedicine, as well as medical technology developed by affiliated startup companies.

“Israeli technology is perceived as premium and hot,” Debow said. “It would be up there with Philips and GE.”

Formally established in October 2021 by U.S. Secretary of State Tony Blinken and the foreign ministers of the three countries, I2U2 got a top-level launch last year when Biden held a video conference from Jerusalem to discuss the initiative with Sheikh Mohammed bin Zayed, now president of the UAE; Indian Prime Minister Narendra Modi; and the Israeli prime minister at the time, Yair Lapid.

The first project announced after the call in July was a $2 billion investment by the UAE in developing a series of food parks across India that would use Israeli and U.S. technologies to reduce food waste, conserve fresh water and use renewable energy sources. A second project is a hybrid renewable energy initiative in India’s Gujarat state to generate 300 megawatts of wind and solar capacity along with a battery system to store the energy.

Besides health care, other areas where the commercial paths of the UAE, India and Israel intersect is in water conservation and the diamond trade. Watergen, an Israeli company that can extract large quantities of drinking water from the air, opened a branch in India after a visit in 2018 by Prime Minister Benjamin Netanyahu. Watergen also started operating in the UAE after the Abraham Accords normalized ties between the two countries that had no diplomatic relations before 2020.

The transition of the landmark Arab-Israeli agreements into a multilateral network will have further benefits down the line in developing the alliance as a regional hub for international trade, according to Sanjeev Dutta, executive director of commodities and financial services at the Dubai Multi Commodities Centre.

“You’re opening up corridors, you’re opening up efficiencies, you’re removing a protectionist mentality,” Dutta told The Circuit in Ramat Gan, Israel, where he attended the World Diamond Congress last month.

The DMCC, which houses the Dubai Diamond Exchange as well as global tea and coffee markets, has for years been an environment for interaction among Indians, Israelis and Emiratis, all central players in the global diamond market. It is a free-trade zone and a city within the city of Dubai that is made up of 87 office and residential towers with 100,000 people. More than 75 Israeli companies in industries ranging from financial services to telecommunications and cybersecurity are based in the DMCC.

“The governments have created the playing field for industry across these geographies,” Dutta said. “We provide the infrastructure. It’s like a one-stop shop.”