Hong Kong Secures Billions in Saudi Deals at FII 2024

In a powerful display of cross-regional economic partnership, Hong Kong secured multi-billion dollar commitments from Saudi Arabia at the 2024 Future Investment Initiative (FII) Summit held in Riyadh. The landmark summit drew in hundreds of leaders, officials, and innovators from around the world, with the Hong Kong delegation of over 100 representatives making headlines for striking nearly a dozen agreements with Saudi partners. These agreements underscore a shared vision for sustainable growth, innovation, and economic diversification—a vision that aligns closely with Saudi Vision 2030, the kingdom’s roadmap for economic transformation.

As one of the world’s most influential financial centers, Hong Kong has long been a gateway to mainland China, connecting global investors to lucrative Asian markets. With these recent agreements, it is expanding its reach into the Middle East, tapping into Saudi Arabia’s surging interest in tech, green finance, and innovative sectors. For Saudi Arabia, the collaboration presents a prime opportunity to diversify its economy away from oil dependence by investing in high-potential fields like artificial intelligence (AI), biotechnology, and renewable energy.

Landmark $1 Billion Accord to Support Greater Bay Area Companies

A highlight of the FII 2024 summit was the signing of a $1 billion investment agreement between the Saudi Public Investment Fund (PIF) and the Hong Kong Monetary Authority (HKMA). This deal aims to boost growth for companies in the Greater Bay Area (GBA), which encompasses Hong Kong, Macau, and nine Guangdong cities. The Greater Bay Area is a key Chinese economic zone, projected to become one of the world’s largest and most dynamic mega-regions, comparable to Silicon Valley or the Tokyo Bay Area.

The partnership seeks to facilitate GBA-based companies’ expansion into the Middle East, reflecting Saudi Arabia’s commitment to becoming a central hub for international business and innovation. According to PIF officials, this fund is expected to drive advancements in high-growth sectors such as fintech, clean energy, and digital infrastructure, with a focus on sustainability—one of the pillars of Saudi Vision 2030.

Supporting Start-Ups: Beta Lab’s $300 Million Fund Access

Two days before the $1 billion deal was announced, another significant partnership was unveiled. Saudi Arabia’s Beta Lab, a prominent incubator, granted Hong Kong’s Science and Technology Park (HKSTP) access to its $300 million fund. This fund will allow selected start-ups from HKSTP to showcase their expertise in AI, food technology, and biomedical sciences, providing a crucial platform to scale their operations and access a new, receptive market in Saudi Arabia.

This strategic alliance offers considerable advantages for Hong Kong’s thriving tech ecosystem. In recent years, HKSTP has been a breeding ground for cutting-edge advancements in AI, biotech, and fintech, with companies often attracting funding from Silicon Valley and other global tech hubs. By partnering with Beta Lab, Hong Kong’s start-ups now have a unique opportunity to penetrate the Middle Eastern market and collaborate with Saudi experts.

Albert Wong Hak-keung, CEO of HKSTP, emphasized that Beta Lab’s $300 million fund offers Hong Kong’s tech-driven enterprises an unparalleled opportunity to contribute to Saudi Arabia’s knowledge-based economy. “Saudi investors are increasingly looking for innovation-driven sectors to diversify their portfolios, and Hong Kong’s start-ups have the expertise they’re looking for,” Wong noted.

New ETFs Open Up Investment Channels Between Hong Kong and the Middle East

In a further step to enhance financial connectivity, two new exchange-traded funds (ETFs) valued at a combined $1.8 billion began trading on Saudi Arabia’s Tadawul exchange during FII 2024. These ETFs give Middle Eastern investors access to publicly traded companies in Hong Kong, marking a milestone in financial cooperation. The ETFs’ launch aligns with the broader aim of creating an interconnected financial ecosystem that fosters cross-border investments, expanding Hong Kong’s reach to Middle Eastern institutional and retail investors.

This move builds on a trend started last November when an ETF of Saudi companies, including Saudi Aramco, debuted on the Hong Kong Stock Exchange. With growing investor interest in diversifying portfolios, the newly launched ETFs meet a rising demand among Middle Eastern investors to access Asia’s economic growth through Hong Kong’s equities market.

Hong Kong’s Financial Secretary Paul Chan Mo-po highlighted that September 2024 saw a rally in Hong Kong’s stock market, drawing renewed attention from investors in the Middle East. The ETFs, Chan said, represent a critical development in establishing stronger, more sustainable financial links between Hong Kong and Saudi Arabia, enhancing portfolio diversity and allowing investors to tap into different economic growth cycles.

Renewed Focus on Islamic Finance and Green Bonds

In line with Saudi Arabia’s extensive infrastructure projects under Vision 2030, Chan also noted that Hong Kong is well-positioned to revive its Islamic finance sector. With its robust regulatory framework and deep capital pool, Hong Kong is equipped to facilitate the issuance of Islamic bonds (sukuk) and green bonds, enabling Saudi companies to access a vast network of international and mainland investors. These financial instruments not only provide much-needed capital for Saudi Arabia’s transformative projects but also align with global shifts toward sustainable finance.

In recent years, green bonds have gained prominence as countries worldwide strive to meet environmental goals. Hong Kong’s commitment to environmental, social, and governance (ESG) principles makes it a valuable partner for Saudi Arabia, whose Vision 2030 emphasizes sustainable development. By issuing green bonds through Hong Kong, Saudi Arabia can attract eco-conscious investors from Asia, the U.S., and Europe, boosting funds for projects ranging from renewable energy facilities to eco-friendly urban developments.

Building on Two Years of Bilateral Diplomatic Efforts

The successful delegation to FII 2024 is part of a broader two-year diplomatic push to strengthen ties between Hong Kong and Saudi Arabia. The collaboration took root with Hong Kong Chief Executive John Lee Ka-chiu’s visit to Riyadh in February 2023, a groundbreaking trip that laid the groundwork for the recent accords. The growing relationship has brought together leaders, investors, and entrepreneurs, creating an open dialogue between Hong Kong and Saudi Arabia that fosters trust and mutual growth.

Notably, Cathay Pacific Airways resumed its direct Hong Kong-Riyadh route, which had been halted in 2017. This direct flight, reducing travel time to nine hours, will be a significant catalyst for business and cultural exchange. Cathay Pacific is also in code-sharing discussions with Saudi Arabia’s Riyadh Air, a new national carrier that has placed orders for 60 Airbus aircraft as part of its expansion plans. This collaboration is expected to drive an influx of travelers between the two regions, facilitating talent exchange and economic development.

Prominent Deals and Saudi Interest in Hong Kong’s Tech Ecosystem

The FII 2024 summit proved to be a lucrative opportunity for Hong Kong’s start-up ecosystem, as more than 200 Saudi investors met with Hong Kong-based companies specializing in renewable energy, biotech, robotics, and AI. For many start-ups, the event was a chance to showcase cutting-edge solutions to a receptive audience and secure substantial financial backing from Saudi investors keen to support Vision 2030.

One notable deal involved AIFT, a Hong Kong start-up providing pet insurance and cybersecurity solutions. With backing from Saudi reinsurer Walaa, AIFT expanded its insurance coverage to $600 million. This milestone illustrates Saudi Arabia’s increasing interest in a diversified range of sectors, beyond traditional industries, to include advanced tech, financial services, and cybersecurity.

Albert Wong Hak-keung from HKSTP noted an unexpected outcome of the summit: Saudi investors expressed strong interest in construction-focused start-ups. This shift stems from Saudi Arabia’s need for innovative construction solutions to fuel the many infrastructure projects under Vision 2030. “The scale and ambition of Vision 2030 require fresh, innovative approaches to construction and urban planning,” Wong said. “Hong Kong’s companies are well-equipped to bring that expertise.”

FII 2024: Catalyst for Expanding Cross-Border Capital Access

As Middle Eastern investors increasingly look to diversify their portfolios, Hong Kong’s capital markets offer a stable and lucrative destination. The financial connectivity established through the new ETFs and potential future cross-border listings opens a gateway for Middle Eastern investors to access Hong Kong’s growth sectors. At the same time, it allows Saudi and other Middle Eastern companies to attract funding from U.S., European, and Chinese investors in Hong Kong through the city’s Connect transborder channels.

The Connect scheme, which links Hong Kong’s markets with mainland China, has become an attractive investment platform for international players. This unique access model allows for more fluid capital flows, offering Middle Eastern firms unprecedented access to Asian markets. Paul Chan, who has attended two FII summits since 2022, remarked on Hong Kong’s long-term vision of becoming a central capital-raising hub for Middle Eastern companies aiming for global growth.

To support Saudi companies’ capital needs, the Hong Kong stock market operator announced plans to open an office in Riyadh in 2025. Meanwhile, the Hong Kong Securities and Futures Commission (SFC) and Saudi Capital Market Authority (CMA) are exploring a strategic partnership to facilitate cross-border listings, including stocks, ETFs, and bonds. This initiative is expected to streamline the process for Middle Eastern and Hong Kong-based companies seeking to go public, bringing investors greater opportunities and enhancing both regions’ economic ecosystems.

The Path Forward: Bridging Finance and Innovation Across Regions

The partnerships established at FII 2024 mark a turning point for both Hong Kong and Saudi Arabia. For Saudi Arabia, the agreements accelerate its diversification efforts, reducing reliance on oil and promoting high-growth sectors aligned with Vision 2030. For Hong Kong, the collaboration opens doors to new markets, reinforcing its role as a leading financial center and innovation hub.

Beyond financial gains, these partnerships signify a growing recognition of the importance of shared knowledge and talent exchange. As both regions invest in forward-looking sectors such as AI, biotech, and renewable energy, they set an example of how international collaboration can drive innovation and sustainable growth.

A Model for Future Global Collaboration

The Hong Kong-Saudi partnership represents a model for how cities and nations can collaborate to create mutually beneficial economic opportunities. By establishing direct financial channels and promoting shared values of innovation, sustainability, and progress, Hong Kong and Saudi Arabia are building a framework that could inspire similar partnerships worldwide. This relationship highlights the potential of economic and cultural exchanges to create synergies across borders, fostering an environment where companies and investors alike can thrive.

As Hong Kong and Saudi Arabia continue to deepen their ties, the benefits are expected to extend beyond immediate financial gains, paving the way for a resilient, innovation-driven global economy. The agreements inked at FII 2024 are a testament to both regions’ commitment to leading in finance, technology, and sustainable growth.