Insights into the UAE-China Investment Markets

[Music] here today and I think well I'll be joined by a group of uh leaders in the financial sector but first of all I think the UAE China investment Corridor has been a highlight for two years so I would like to give a very short quick introduction to let you know about what is happening in the market and then I will share some of the insights and delighted to hear from our distinguished guest speakers so quick glance on China what is China an economy of 17.8 trillion GDP last year and by the three quarters of this year has grown by 4.6 percentage given the speed and the size of the of the community it is still the faster growth um economy in the world and China is one of the largest export Nations globally with 3.5 trillion total export value last year if we look at the capital markets it's also a very sizable and fast growing Capital Market markets standing at 21 trillion total public Equity market capitalization of Greater China and accounting for around 27% weights in the msci Emerging Markets index so China represents many opportunities for you to invest in diverse asset classes on the equity side there are over 10,000 listed companies in Greater China different stock exchanges with a total trading transaction volume of 33.3 uh 33.

8 trillion US dollar YTD this year and thanks to the stock connect the news Bond represents around 3.4 trillion transactions among the total equities and bonds has been a steady growing and healthy sector for all the investors to tap into China growth as well so the total outstanding Bond value of China is around 23.7 trillion us if you look at the outstanding value as well as the new issuance of the Year both indicators have been growing around 10% year over-year and funds is another interesting sector we will which we will hear more from our um speakers but YTD the AUM of the total funds has increased by around 16% this year with over 12,000 funds listed and and also accessible by the markets private Market we're we optimistic to see a lot of momentums coming back to its peak by 20 uh 2019s so a little bit more on the secondary Equity markets if we look at the major three indices of the mainland China stock markets there are two cycles over the past 10 years but YTD this year the market has been up by around 12 to 13% and on the right hand side the different sectors have varied performances the financial sector is the high performing sector lead by Insurance multifinance bankingsales are the consumers and Healthcare and pharmaceuticals which we think we will see some positive signals to be delivered in the coming years the bond market as I said has been fast and steady growth over the past 10 years and right now China represents the second largest global bond market to the world presenting significant financing opportunities for the government as well as for corporates on the fund Market the market this year will still see over a thousand new funds listing with a total AUM of around 4.4 trillion us but ETF passive investment has been a very interesting and fast growing investment vehicle for a lot of international investors so if you look at the total net assets of the ETF it's been up by 76 percentage this year a lot of that primarily thanks to the new stimulus policies a series runs of stimulus policies post September that's why you will see that the average trading volume in October and November monthly achieved 72. billion over 100% growth higher than the previous 9 months average and also the stock and and ETF connects definitely creates a lot of opportunities for international investors to tap into the overall growth there over 200 funds are listed and included in nors bond and nors bond accounts for around 30% of the total transaction volume of the total ETFs got traded in China so a little bit on the private sectors Mina investors are historically been very experienced in investing China private sectors and we're glad to see that there is increasing demand and capital and due flows coming and and and sort of resuming in postco and we're hitting the record high by closing to 2019 so with that I will be very delighted to to welcome our panelists for the session uh we we will have speakers uh from the private sectors from public sectors as well from the banking sectors to give us more of the highlights and insights of the market okay thank you I think um the the MC has already introduced our panelist and background so I'll start straight away so we will Pro probably start with with Grant because you're the capital of the capital so mubadala represents one of the earlier Sovereign wealth fund um with diverse experience in investing in China private sectors and you're also still very positive and bullish about the long-term investment so can you share with us a little bit more about your China investment plan as well as what of the positives and key Transit sectors that you're capturing right now absolutely and thank you casy for hosting this panel today so I think it's important to outline our history in terms of China and so uh mubadala we've been investing through a dedicated China investment program uh for almost a decade now so we we established in 2015 a $4 billion Sovereign partnership between muad and China Development Bank Capital CBC and initially we were looking to use that vehicle to gain Market entry into China and so we made a number of fund commitments initially built out our portfolio of of GP uh on the ground Partners including C and and his firm uh and then over time we started to to make uh co-investments with those Partners uh and made investments in in direct investments in 2018 19 into names such as mayuan JD Health it was a period where there was uh the internet economy was was booming a lot of new economy companies were were coming through and so we were making out a lot of minority growth Investments initially uh and then in by 2021 22 uh we for us to evolve and move to the next level we made a decision to open a local office in Beijing and today we now have 30 uh people across investment uh legal tax Support Services as well so uh fast forward to where we are today and and we're now focusing more on buyout opportunities across Healthcare consumer industrial and business services which is aligned with our our Global mandate and so um as as we look forward we're still finding quality high quality companies where we can have a significant impact and leverage uh not only our Global Network but also uh um our history of of uh building businesses and working with Partners to to create value great thanks for sharing thank that that is definitely very very optimistic on this long-term View and I will move to K given that your your close partner relationship and and H house has been one of the leading asset managers globally um managing a lot of the capitals as also as well as working with with Partners like the S Wells fond so can you share with us your experience on how you work with the partners to to capitalize on the opport unities to invest in China sure thank you very much and it's a pleasure to be here uh you know as Grant had mentioned um you we work uh extensively with many of our Capital Partners here in the UAE as a multi strategy multi-asset class uh GP based in Asia um our strategies span public equities private Equity Venture Capital uh credit and real assets and historically we've invested uh tremendously into Asia with a Focus partly in China and is one that continues to be very compelling as an investment opportunity for us I would say a few things uh make this case quite compelling uh the first is really the valuations that you see in today's Capital markets um if you look at msci China the average PE is roughly 10 to 11 times and that compares quite favorably with uh S&P 500 which is roughly 30 times there you have the opportunity to really invest in some of the leading compan companies across China at very very attractive valuations next I think the other investment theme that we look after is really investing behind Innovation so for many many decades since the opening of China's uh economy it has been very much a global for China or uh China for China but if you look at look at China's Innovation today uh more than 3 million stem graduates are produced uh in China annually that's more than number three through number 10 uh in all the countries in the rest of the world you see the amount of innovation that is really coming out of China that you have an opportunity to really back and build alongside um the best entrepreneurs in that part of the region that's something that we've been proud to be uh investors behind together with our partners from the region and I think the third thematic that we tend to see is that there's been a coming of age of Chinese companies so for many many years the Chinese companies were very much domestically focused you have a 1.

4 billion people popul ation uh you know 18 trillion GDP uh for years it's been a penetration story but now you start to see many of the leading companies uh start to be uh outward focused they start to become much more Global and there we have been as as International investors and together with our partners from the region we've been fortunate to really help with a lot of these companies to go Global and that's been a big opportunity for us as well so all in all um the investment case for China is still very much alive and this is something that we continue to be excited about great I think there's a lot going on there's globalization de globalization police sanche trains that happening around the world so I'm going to touch a little bit on the macron and public market side and turn to Cha pin so you as the market Global strategist for JP Morgan Asset Management that's I'm sure that you got this question a lot particularly recently about how would you advise your clients on global asset allocation and given the overall economic conditions happening globally and and what are the specific opportunities that you see between un and China and the medigans that you would advise your clients as well yes so in this year uh our basic assumption for the global economy is that uh a soft Landing is still on track and the US monetary policy will be uh continuing for the uh easing cycle but the challenge is that there are increasing geopolitical challenges uh particularly for China from the uh end of the Tariff and the trade barriers but but for China uh we also see some uh promising uh Prospect in our uh policies uh yesterday Chinese politic uh politic Bureau uh the top policymaking entity just announced that in the new year uh there will be uh more uh stimulus package and they will help to stabilize the domestic grows so against this background uh I would say uh we remain optimistic about the investment opportunities in China but we are also providing some advices to our clients to further diversify uh so I think uh Middle East might be a Target uh for Chinese investors to diversify their Global investment uh as a global asset manager uh JT JP Morgan is always trying to help uh the Global Investors to invest in China and at at the same time uh we help Chinese investors to invest in the global assets uh so I I think that's quite similar to the mission of ababi the capital of capital and the hub for Global fund flows uh and during this uh per uh during this period of the uh Rising uncertainties I think diversification is critical for investors both globally and for Chinese domestics uh and uh at the same time time uh we would also uh advise our clients to stay invested in the Steam for Innovation and Technology uh because uh in in in the future uh world I think the global economic growth mainly is mainly driven by Innovation uh and uh from both China and Global Market we can see more and more uh targets or uh investment uh destinations uh for us to invest in the technology uh for example China in China we still see huge potential in the areas of AI uh of the robotics uh and the manufacturing automation uh and I think for uh UAE investors uh China is also providing such opportunities there okay great and we're going to turn to Dr H so um shanai P develop Bank represents Hong Kong and in a a lot of transactions IPOs follow on debt issuance m&a sector so and also Hong Kong is the Gateway for Global Investors to tap into the opportunities in China so what would you um what's your advice on on how Global Investors might find opportunities in Hong Kong m in China attractive and and what role can you play there uh okay thanks uh Casey uh as we know Hong Kong Capital Market is the most active and uh uh sophisticated Market of the world especially uh Hong Kong's IPO is a very important har uh in the world for the uh cons ranking uh among the top uh top International uh Center Financial Center uh Hong Kong uh IPO Market uh in 2024 uh has shown resiliance and growth especially uh the successful launching of R 18a regime uh announc for the biot technology company in 2018 uh we are also seeing uh uh notable increase in listing of Technology especially the Innovative uh Hightech company uh uh listing uh in Hong Kong and uh uh 2024 uh no which uh the Hong Kong stock uh exchange has become the most goto platform uh for Chinese high tech company uh especially for the mainland uh China uh to enter the Capital Market uh so we Outlook uh for 2025 is a positive with the expectation of a continuing rebound and increased activity I also want to add that there is a great number of uh listed company uh having high you dividend return which are uh undervalued so I believe to be one of the opportunity for investors so whole International investors especially uee investors uh can participate uh Hong Kong uh Capital Market investor investors can leverage the uh this uh opportunity uh through director or in direct indirect channels but also uh can through strategic partnership uh with Hong Kong based company or in financial institute uh institution uh to gain insight and access to investment opportunity thank you great I think Hong Kong market definitely show resistance resilience this year as we welcomed a couple of large IPOs and secondary listings in in the M Market so chin uh coming back to the public side on the ETF side we know that ETF has been making tremendous progress this year and JP Morgan as the asset management firm have been in China for more than 20 years and use um the fund manages over 200 over 100 products in the market so what's your view on the sematic investment opportunities with sectors and kinds of products would you advise your clients uh yes uh so just following our previous discussion I think uh inovision and technology is the most Cutting Edge opportunity in China uh I I think in the area of AI we can see that China might have some advantages in the uh AI adoption in manufacturing system sector uh uh in in the US maybe AI is mostly used in software in service but in China with our large base of manufacturing uh it could be used in automation uh in Auto driver and in some other uh more like uh physical areas uh and the second area I would focus is on our health care uh actually China is entering in aging Society uh and there there's increasing demand for soft Health Care Services uh and the third area might be the consumption uh in the past few years we we always know that China uh there there's some cyclical headwinds for consumption China uh but we still believe uh with appropriate policy reactions uh the consumption could go back uh to the cental uh Center Stage for Chinese development strategy uh and in this sector some leaders might benefit from the new policies uh and in the area of ETFs uh we see the quick growth in the total amount and at the same time there is some structural uh optimization in our ETF products uh in the middle of uh SE September Chinese Authority uh launched the new ETF we call CSI A500 uh which I believe is more representative to the uh changing economic structure of China uh in our old ETFs uh they are mostly focused on the uh large cap stocks uh and the uh Financial sectors and the uh realistic sectors are more uh have largest weights there uh but in those new ETFs uh they become more rep representative uh with more compon components from the technology sectors uh and this new ETFs attracted huge amount of inflows in the first months of the launch uh the E500 attracted about uh 150 billion uh US dollar armb into the market uh and we believe there there will be more opportunities for Global Investors to explore in this are great and we're going to talk about the the connections and ties between UAE and China and what role Ro can each of you play Given that you are in the center of the ecosystem so so Grant so aside from the Hat of being an investor and shareholder how would you impact the UA in China economy in the corridor and how would you help your um foral companies to to expand into other markets so we've been trying to position ourselves as more than just capital and so by being a strategic partner with a number of our portfolio companies we've been looking at ways that we can help open up Market access to the region using the uee as as a Gateway and so we have three cases uh J&T Express uh who who came into this Market a few years ago Shen uh and weide as well and so there were three portfolio companies that we've we've helped to gain Market entry into into the region uh and we separately to that we also have a UA Investments platform that is very active and so we work closely with them to try and help uh our partners in China to to access this part of the world great and in Carl same for you the Hue houses firm Bridging the capital facilitation of these two regions and then how are you looking to build up the linkage and engagement this Corridor yeah sure so you know traditionally the link between China and UAE has B been a diplomatic one a trade and Commercial one and from a capital perspective very much a uh oneway with a lot of um investments from the The Sovereign Wealth Partners into China and very much as I had mentioned in my prior comments you you start to see the coming of age of a lot of the leading companies in China who are looking at other nodes in their Global presence and a lot of our portfolio companies whether it's in life science whether it's in decarbonization whether it's in manufacturing whether it's in technology and fintech are looking actively at setting up uh their overseas hubs and the UAE being one that is very much a prominent uh platform uh really if you look back in the history of China in the UAE you know if you think about the Middle East as a Silk Road in the past linking the East and the West even now um you know the UAE is seen as a potential platform for many of our companies to access the rest of the Mina region the rest of uh Europe and further markets from here so uh you know from as a hill housee um as an investor uh we want to act as that uh partner to them you know having been in this region for more than 10 years having partners who are locally connected and to us uh any sort of partnership is going to be vital so um and and being a shareholder whose value added in for our portfolio companies and helping them come to this region has one of been one of a priority for us great I heard two key words partnership and connectivity in the ecosystem these are the two things that really matters to to to boost the tie and coming back to you Dr hry so with a banking background and spgb has full licenses in Hong Kong then how do you find opportunities in UAE attractive to you and how is the bank going to participating in EMB bridging and enhancing the tie across Nations okay thanks uh the uee China uh Coro uh offerings offers significant uh opportunity uh for for Chinese company and the U company uh as a as Investment Banking sbbi can play a crucial role uh in the growing EC economic uh ties between the two countries I have two points to to share the first is with the increase in economic ties there is a gr demand for m& uh uh Chinese company looking to expand their business in UAE uh will require expert guidance uh in navigating the regulatory uh environment and entry strategies and uh also by we we can uh boosting the investment and join Venture opportunities between the Chinese and ab companies we expect a great opportunity in uh fund raing uh and due or second secondary listing uh in adx for the ch uh company especially the Hightech uh company and the secondly would be the asset management uh there is the potential for spbi to create a recing uh investment fund uh focused on the UAE and China uh Target sectors such as renewable energy uh semi conductor and uh Ai and uh some new infrastructure uh and so on this one can attract both in institutional or uh individual investors to capitalize on the growth uh potential uh so uh with the goal of being a trusted partner to our our client we would uh uh participate and maximize the opportunities uh by the Str strategic partnership uh with uh and the collaboration with uee financial institutions and uh we will increase the local presence in the UAE uh can help us to better understand our client and Market uh uh and so on thanks it's great to hear and so we are running out of time but thank you very much for every panel representing the S leadership from the private sector the public sector and banking sectors and then thank you all for your support and con ction to building the tie of the two Nations thank you very much [Music]