Boao Observation | Signals of Middle Eastern funds entering Hong Kong are becoming clearer, Zheng Yongnian says developing new industries is the key

Ask AI · Can new industry development plans solve Hong Kong’s capital transformation challenge?

Recently, market chatter about “Middle Eastern capital inflows of HKD 300 billion into Hong Kong” has been circulating. First Financial Daily learned from multiple industry insiders that there is no clear verification for this figure, but it has become a new trend for Middle Eastern capital to consider entering the Hong Kong market.

At the Boao Forum for Asia, Hong Kong Chief Executive John Lee pointed out that while certain forces are busy drawing lines and fighting, Hong Kong is working to open up new trade routes. He also revealed progress in recent investment agreement talks with Qatar and Saudi Arabia.

Insiders believe Hong Kong’s stability and certainty have become the key factors attracting Middle Eastern capital, but how to transform short-term “hot money” into long-term patient capital remains a challenge.

“Capital comes for profit; if there’s no profit to be made, it will leave. This is a major challenge for Hong Kong.” Zheng Yongnian, dean of the School of Public Policy at the Chinese University of Hong Kong (Shenzhen), and chairman of the Guangzhou–Hong Kong–Macao Greater Bay Area Institute, said in a group media interview, noting that the key is whether these foreign funds can be converted into risk capital and invested into China’s real economy.

Signs of Middle Eastern funds entering Hong Kong are becoming clearer

Rumors that Middle Eastern funds are entering Hong Kong are being supported by a series of views from the Hong Kong Special Administrative Region government.

“Concluding more free trade agreements is also of paramount importance. We are committed to joining the Regional Comprehensive Economic Partnership Agreement, which is the largest free trade agreement in the world in terms of scale.” John Lee said.

In fact, John Lee has previously mentioned cooperation with Middle Eastern capital on multiple occasions in public settings. On March 17, when he attended a meeting, he said the Middle East situation has further highlighted Hong Kong’s advantages in terms of security, stability, and significant development opportunities. If capital is looking for an exit route, Hong Kong will engage more actively with Middle Eastern investors.

Hong Kong’s Financial Secretary Paul Chan disclosed in early March that recently, a number of U.S. funds have flowed into Hong Kong, China. Regarding whether Middle Eastern funds choose Hong Kong because they are “seeking a sense of security,” Hong Kong has also made adequate contingency plans.

The series of recently disclosed data also supports this point. According to data recently released by the Hong Kong Securities and Futures Commission, in 2025 the net capital inflow into funds established in Hong Kong reached HKD 356.7 billion, up 118.5% year over year; as of the end of that year, the asset management scale (AUM) of those funds surged 38.3% year over year to HKD 2.28 trillion.

Entering March, there are also signs of a rebound in Hong Kong stock holdings by “international intermediaries.” “International intermediaries” typically refers to overseas financial institutions holding Hong Kong stocks through the Hong Kong Central Clearing and Settlement System (CCASS). Wind data shows that as of March 10, measured by multiplying the number of holdings by the latest weekly average price, the market value of Hong Kong stocks held by these intermediaries increased by about HKD 4.4 billion quarter to quarter. Among them, the holding market value of Alibaba – W saw the most significant rebound.

Also, according to media reports, in a recent meeting Hong Kong’s Deputy Secretary for Financial Affairs Chan Ho-lim revealed that, because Hong Kong is relatively stable and predictable, in the first two months of this year alone, more than 20 family offices (family offices) have used assistance from the Investment Promotion Department to set up in Hong Kong or expand their business.

In group interviews with media at the Boao Forum for Asia, Zheng Yongnian also pointed to this trend. He said that when capital seeks certainty and elsewhere is perceived as uncertain, it will automatically flow to regions that are more certain. Hong Kong is precisely such a place. At the same time, Middle Eastern capital shows interest in the development prospects of mainland China and sees Hong Kong as a gateway to enter the mainland.

More importantly, Hong Kong can meet the core needs of Middle Eastern funds to “seek safety and also generate value.” An industry insider told a reporter that most Middle Eastern funds are sovereign wealth funds and family offices, while Hong Kong stocks offer a large number of assets with stable operations, stable dividend yields, and reasonable valuations, and that can provide sustained cash flow—making them relatively well matched.

Can “hot money” be kept?

The market worries that once short-term hot money enters Hong Kong, it may not stay in China long term, and may instead flow into which sectors.

Zheng Yongnian believes that if hot money cannot find a place to land, it will become highly unstable. Capital comes for profit; if there’s no profit to be made, it will leave, which is a major challenge for Hong Kong. He noted that Hong Kong’s four major industries are all service industries, and the real economy is relatively weak. Therefore, developing new industries is key. Capital can only truly stabilize when it is applied to the real economy.

Zheng Yongnian suggested that, around technology-intensive industries such as innovative drugs and artificial intelligence, Hong Kong should strengthen cooperation with the mainland and speed up the development of the Northern Metropolis.

Zheng Yongnian further pointed out that Hong Kong’s financial center should clearly define its own positioning. Due to restrictions in institutional mechanisms, it is difficult for mainland China to develop a risk investment system similar to those of Wall Street or London, while Hong Kong can play that role. Shenzhen’s DJI and early Tencent both grew through risk investment cultivated in Hong Kong.

He emphasized that China currently lacks neither capital nor even that capital is already in a stage of surplus; what is truly lacking is patient capital and risk capital.

First Financial Daily noted that in mainland China’s innovative enterprises’ IPOs in Hong Kong, Middle Eastern sovereign wealth funds have appeared frequently,** **actively locking in 6 to 12 month lock-up periods. **For example, Yiyu Technology (Mini Max) listed on January 9, with Abu Dhabi Investment Authority subscribing 22.8k shares at HKD 165 per share; Precision Medical (A new name may appear) listed on January 8, also participating with 14 cornerstone institutions including the Abu Dhabi Investment Authority, with Abu Dhabi Investment Authority subscribing 3.07M shares at HKD 43.24 per share.

However, in a recent research report, CICC stated that at present the way Middle Eastern funds participate still mainly relies on strategic allocations in the primary market (such as cornerstone investments in IPOs), and has not formed systematic capital transfers.

In addition, Hong Kong’s “bridgehead” role is also attracting attention. At the Boao Forum for Asia, John Lee disclosed that he will make good use of his network to create opportunities for investors. The Hong Kong Special Administrative Region government has set up a dedicated “Going Out” task force to support mainland enterprises in expanding overseas business. Last week, under the “Going Out” framework, it launched a cross-sector professional services platform, aiming to connect the needs of mainland enterprises with the intentions of global buyers and investors, as well as Hong Kong’s world-class professional services.

(This article is from First Financial Daily)