Hong Kong Chief Executive John Lee Ka-chiu (fourth left) meets Minister of Investment of Saudi Arabia Khalid Al-Falih (sixth right) in Riyadh, Saudi Arabia, on Feb 5, 2023. (PHOTO / HKSAR GOVERNMENT)
The Middle East’s ambition of diversifying its seams to mine for economic sustainable growth beyond the fixation on oil resources unfurls a host of commercial and investment opportunities for the Hong Kong Special Administrative Region and the Chinese mainland to tap, said Benjamin Hung, CEO for Asia at Standard Chartered.
Among the luminaries from the financial services, technology and logistics who accompanied HKSAR Chief Executive John Lee Ka-chiu on his visit to the Middle East, Hung said he felt the urge to peddle the city’s advantageous portfolio to attract talent and investment from Saudi Arabia and the United Arab Emirates.
One of the largest wellsprings of energy production and energy consumers, the Middle East has retained its status as the highest energy self-sufficiency ratio in the world, while contributing 31 percent of global oil production and 16 percent of the world’s natural gas supply in 2019. In 2020, the region accounted for 48 percent and 40 percent of known global oil reserves and gas reserves, respectively.
As an international financial center and nexus of global business activities, the HKSAR is well-placed to bridge the sprawling networks of the Middle East and the mainland for an exchange of trade, information and transactions, Hung said.
We’re eyeing the opportunity to convince them (companies in the Middle East) to invest in Asia and Greater China. And, where’s the shortcut for their asset investment in China? … Hong Kong, is the go-to entry point, because we have Shenzhen-Hong Kong Stock Connect, Shanghai-Hong Kong Stock Connect and Bond Connect, complete with free flow of capital.
Benjamin Hung, CEO for Asia at Standard Chartered
Oil, literally and figuratively, greases the wheels of the Middle East’s economy, Hung acknowledged, thanks to the colossal export and reserves of petroleum in Saudi Arabia and United Arab Emirates – the pearl of the “energy empire’s” crown. In 2020, Saudi Arabia was the world’s biggest exporter of crude petroleum totaling $95.7 billion, with the main destination of its exports being China, which accounted for $24.7 billion.
While thriving on petroleum as a precious lifeline, “the region has sought to diversify its economic profile by branching out to develop its tourism, research, technology and innovation, rather than relying on the bonanza brought by its rich oil resources,” Hung noted. Their economic diversification ambition entails the support of advanced technologies and innovations, such as 5G, and robust logistic facilities, and this is where the HKSAR and the mainland can come into play, he said.
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The surge in oil prices has culminated in handsome revenues for the Middle East, which have to be channeled into capital investment to fulfill the kingdom’s aggressive investment strategy as stipulated in the Vision 2030 initiative. “We’re eyeing the opportunity to convince them to invest in Asia and Greater China. And, where’s the shortcut for their asset investment in China?” Hung asked. “Hong Kong, is the go-to entry point, because we have Shenzhen-Hong Kong Stock Connect, Shanghai-Hong Kong Stock Connect and Bond Connect, complete with free flow of capital.”
The matter of timing the partnership on asset investment doesn’t seem to be a concern to Hung, who reasoned, “The opportunity will be out there, in the long run, regardless of the projected decline of the oil prices.” Plus, he added, “Asia has the largest population in the world, and it’s projected to contribute almost two-thirds of global economic growth this year by the International Monetary Fund. All these perpetuate the belief that business opportunities in Asia will abound.”
Most transactions involved in large-scale trade and commercial exchange today are conducted in US dollars, Hung said. “I see a wealth of commercial opportunities for the renminbi lying ahead, while Hong Kong is well poised to connect the two exceptional economies – one boasting bountiful energy supply and the other strong demand.”
This photo shows a view of Victoria Harbour in Hong Kong on June 11, 2020. (PHOTO / XINHUA)
I see a wealth of commercial opportunities for the renminbi lying ahead, while Hong Kong is well poised to connect the two exceptional economies – one boasting bountiful energy supply and the other strong demand.
Benjamin Hung, CEO for Asia at Standard Chartered
A leading international banking group, Standard Chartered enjoys a solid presence in 59 markets around the world, primarily in Asia, the Middle East and Africa. The common denominator of these markets is, Hung said, that they are all soaring on the fast track of economic development. If investors and businesses or financial products in these powerful markets can be effectively matched and connected, the sum will be greater than its parts, Hung contended. “It’s our (Standard Chartered) expertise, with a sizable network of global presence and bonds under our belt.”
China is underrepresented in overall global investment portfolios, Hung said. Numbers speak volumes for the dearth of allocations to China. For example, pension funds and endowments have only 3 to 5 percent allocations to China, while just 14 percent of asset owners globally, by number, and 5 percent of North American institutions have any dedicated exposure to China’s equity markets, according to a survey in 2020 by data analytics firm Greenwich Associates.
But this will change in the next decade, as China’s rapid economic development and the potential of Chinese equity markets has turned the world’s heads, Hung said.
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The needle can hardly be moved without the involvement of the HKSAR, which as a superconnector between the mainland and overseas investors, is well versed in handing offshore settlements and boosting overseas exposure to the mainland’s equity markets, he said.
While a trip alone can barely settle everything that is written down on the agenda, the visit to the Middle East was rewarding, with some memorandums of understanding and agreements reached, Hung said, adding, “Intimate communication deepened the rapport and mutual trust between us.”
Shadow Li contributed to the story.