Fortune unveils in a fresh article that in a bold move to diversify its investment landscape, Hong Kong has set its sights on the Gulf, launching the Middle East's largest exchange-traded fund (ETF) and sparking a flurry of financial activity between Asia and the oil-rich region.

As Gulf nations like Saudi Arabia and the UAE look beyond their oil dependence, they're increasingly turning to Asia's fast-growing tech sectors and emerging markets, opening the door to a new era of economic alliances.

In October 2024, Hong Kong’s top financial official, Paul Chan, launched the largest exchange-traded fund (ETF) in the Middle East from Riyadh, Saudi Arabia, marking a significant move to strengthen financial ties between Hong Kong and the Gulf. The ETF, with $1.2 billion in assets under management, tracks 30 sharia-compliant companies listed in Hong Kong. Notably, companies like HSBC were excluded due to their interest-charging practices.

Hong Kong is among many Asian economies vying for Gulf investment, as sovereign wealth funds from Saudi Arabia and the UAE increasingly look eastward. “Gulf countries need to find new markets, and Asia is the most compelling,” explains Vasuki Shastry, senior advisor at Gatehouse Advisory Partners in Dubai. The Gulf is seeking to diversify its portfolios, and Asia’s fast-growing economies, particularly in tech, are viewed as key opportunities.

The Middle East's shift in investment strategy is not purely commercial. It aligns with broader efforts to build a post-oil economy and hedge against uncertainties in US trade policies. In recent years, the UAE and Saudi Arabia have explored joining the BRICS bloc, signaling a desire to diversify their geopolitical and economic alliances.

As Gulf investors look to expand, China and India remain key areas of focus, though geopolitical tensions complicate deeper ties. Gulf funds have increased their investments in Asia, with Saudi Arabia’s Public Investment Fund (PIF) investing $6.6 billion in Asia between 2022-2024, double its previous commitments. This shift is driven by the region’s focus on technology, with the UAE’s CYVN Holdings investing $2.2 billion in Chinese EV startup Nio, highlighting the sector’s growing appeal.

Gulf investors are also eyeing Southeast Asia, with Indonesia securing a $10 billion pledge from the UAE for renewable energy ventures. The growing investment in Asia reflects both economic and strategic ambitions, as Middle Eastern nations seek to tap into Asia’s vibrant markets while diversifying their portfolios amid shifting global dynamics.

By Naila Huseynova

Source: caliber.az