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HK's gateway advantage for Middle East explored in listing webinar

By JAN YUMUL in Hong Kong | | Updated: 2024-04-24 21:25
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Photo taken on April 24, 2024, shows participants from Saudi Arabia and Hong Kong holding a discussion at a webinar. [Screengrab for]

The Hong Kong Special Administrative Region's position as a gateway to the lucrative Asian market and its robust financial infrastructure were among the advantages cited on how it would add value to the diversification efforts of Saudi Arabia and the broader region.

Deputy Director of Research Hong Kong Trade Development Council Louis Chan noted that the Middle East companies were proactively seeking overseas expansion for "various reasons", but primarily, for economic diversion either in terms of market or sources of investment.

The discussion was part of a webinar series, titled: "Saudi Arabia: Fuelling a Visionary National Blueprint Via a Hong Kong Listing" on April 24, jointly organized by the Hong Kong Trade Development Council and China Construction Bank International (Holdings) Limited, or CCBI, as the panel explored the advantages and broader opportunities for listing with Hong Kong.

Chan told the forum that when they conducted a qualitative survey and interviews with the Middle East companies about doing business in Hong Kong last year, most of the companies believed the city thrived in liquidity.

They also said that the Middle East companies were looking to Hong Kong to further strengthen support when it comes to business decision makers, regulators and exchanges in stock markets, as well as governance of the Middle East economies so as to "oil the wheels of the Middle East companies" seeking listings here in Hong Kong.

"We also asked our experts and respondents for their opinions on what are the top sectors…we found that healthcare, high technology, energy, renewables, infrastructure and finance were the top drivers or top leaders on the roster," said Chan.

"We believe that in the Middle East, healthcare, similar to other parts of the world, is very much top of the mind of many investors and there is a huge, wealthy population and big lead in the Middle East or healthcare sector to thrive and prosper further. And listing here in Hong Kong as health tech hub in the region would definitely add value to that proposition," he added.

He also noted that renewables would at the forefront of global investors thoughts, but given the reach of energy-related commodities in the Middle East, energy and renewables "would be very much under the spotlight" and infrastructure.

Chan said the panel's focus was mainly on the Saudi Arabian market, given its mega projects like its futuristic city NEOM – all part of the grander diversification plan called Vision 2030, which Saudi Arabian Crown Prince and Prime Minister Mohammed bin Salman Al Saud introduced in 2016.

"Definitely fundraising or international capital (would be needed) to contribute to the success of those projects. Finance is straight forward because Hong Kong as (a) financial center would add value to equation for both sides to achieve investment target or goals," said Chan.

Mosaed Al Enezy, Founder & CEO, Mudaraba Financial Company, said that the robust financial infrastructure of Hong Kong and its expertise, coupled with Saudi Arabia's ambition can benefit financial sectors and encourage support for diversification. He also said collaboration could expand in logistics, tourism and hospitality where "we can work together".

"In addition, I believe that Hong Kong's strategic location, world-class transportation network, including international airport, in addition also to being a global financial hub (can) also provide need to access capital and financial services, which is essential for expansion and the ecosystem, Hong Kong's strength can help a lot," said Al Enezy.

Steven Chou, chairman of the Board of Directors, Sahm Capital Financial Company, underscored Hong Kong's reputation for its efficiency. He said the city also has law firms, accountants, market makers and is accessible to all kinds of services.

He said the momentum with Hong Kong Exchange was "number 1 in Asia". He recalled the time he arrived in Riyadh when most of the focus on market was energy and retail.  But now, even Hong Kong's budding sector like biotech, new energy and banking finance are aligned with Vision 2030.

"I believe that the jurisdictions principles in both regions share the same mindset so it's easier to understand the regulators' mindset. In general, it's easier for both, whether it is on a secondary listing or primary listing," said Chou.

Managing Director of eWTP Arabia Capital, Azzam Alburaykan said they looked at "superconnector" Hong Kong as one of "the best and important hubs" connecting Asia with the Middle East and Saudi Arabia". He is optimistic cooperation in renewables, tourism and digital infrastructure, which is one of the best industries, can expand, noting that a lot of companies were also located in Hong Kong.

Calvin Chan, managing director, China Construction Bank International, said the Saudi Exchange Tadawul has grown exponentially since its establishment in 2007, noting that it is the 8th largest stock market in the world, with a market cap of over $3 trillion, raising over $3.4 million in terms of Initial Public Offering.

"Amongst the listed companies on the exchange, the energy sector obviously was dominant and account for 77 percent of the market cap of the exchange. As a critical component of Saudi market, Tadawul has been at the forefront of the capital transformation of Saudi Arabia, blueprint Vision 2030," said Chan.

Chan said that they have seen a gradual opening up of Saudi regulatory regimes to foreign investors.

"The qualified foreign investors rule or the QFI rule was introduced in 2015, which allowed QFI applicants, mostly sizeable financial institutions to invest directly on Tadawul listed securities. And starting from 2019, we've seen FSI schemes, or foreign strategic investors schemes, being launched, allowing non-financial institutions to invest in Tadawul's securities," said the CCBI managing director.

He said they have also seen "improved attractiveness to foreign companies to list with the Saudi capital market in light of its economic transformation driven by Vision 2030.

Chan summarised six tips for companies in Saudi Arabia to list in Hong Kong.

The city, Chan said, can naturally provide Saudi companies to access necessary funds to finance overseas business expansion given that Hong Kong has more diverse sectors currently listed on its stock exchange.

As Hong Kong offers a gateway to a lucrative Asian market, the city is an ideal listing destination for Saudi companies, thanks to the city's business links to the Chinese mainland and ASEAN market, the "strength as an international financial center".

"This also aligns with the Saudi kingdom's economic goals, which is to diversify income sources and to promote private sector development," said Chan.

He said that many Saudi companies seeking overseas expansions through closer economic ties with China, said the ways to achieve these ties are "to form joint ventures or partnership with Chinese companies, leverage their expertise and listing in Hong Kong".

This not only brings Chinese expertise to Saudi companies, the CCBI executive said, but "also expands Saudi company's appeals to both Chinese and international investors."

Another important aspect is Hong Kong having hybrid Chinese investors and international investors, creating "a melting pot of Chinese funds and international funds", which is often an attractive prospect for companies seeking listing in Hong Kong.

Chan said Hong Kong can provide one-stop services for Saudi companies where there are professional dedicated stakeholders that would enable proper support for enquiries from Saudi Arabian companies and facilitate collaboration throughout the listing process.

"The absence of capital control and links exchange rates systems are some of Hong Kong's most appreciated attributes. These allow Saudi companies and listing applicants to freely move funds raised to different jurisdictions for different types of deployments and also mitigate exchange risk of Saudi companies when listing in Hong Kong," said Chan.

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