Middle Eastern sovereign wealth funds Qatar Investment Authority (QIA) and Kuwait Investment Authority (KIA) will be the biggest cornerstone investors in the Hong Kong portion of the Agriculture Bank of China IPO next month.
QIA is said to have signed an agreement to buy $2.8 billion worth of shares in the Hong Kong offering, making it the single-largest investor in AgBank’s mega-IPO. KIA will invest $800 million in the offering.
Global economic growth “is very much in favor of the BRIC countries,” Brazil, Russia, India and China, Abdul Kadir Hussain, chief executive at Mashreq Capital DIFC Ltd., said.
Agricultural Bank, China’s largest lender by number of customers, is seeking to raise as much as $15 billion in the Hong Kong part of what may be the world’s largest IPO. It is expected to sell totally $23 billion-$30 billion of stock in Hong Kong and Shanghai combined, exceeding the $22 billion sale by Industrial & Commercial Bank of China in 2006.
The investments from QIA and KIA totaling $3.6 billion in a huge Chinese share offering are the latest sign of the financial and economic ties between China and the Middle East.
QIA also signed a memorandum of understanding for strategic cooperation with AgBank to expand its portfolio in China. The agreement will allow QIA “to further develop its portfolio in China, as well as allowing AgBank to build a leading presence in the Middle East,” QIA said.
“The reduction of global imbalances is pushing toward enhancing this new Silk Road connecting China and the Middle East”, says Alessandro Magnoli Bocchi, chief economist at Kuwait China Investment Co., an investment vehicle established by KIA.
While Western investments still account for about 75% of foreign assets held by Gulf countries, Mr. Magnoli Bocchi believes this proportion will drop by around 10% going forward, and “that 10% will be allocated to areas of the world that are growing fastest.”
China’s economy is forecast to grow by 10% this year and by 9.9% in 2011, according to the International Monetary Fund. It will allow a more flexible renminbi, the central bank said June 19th, signaling an end to the currency’s two-year-old peg to the dollar a week before G20 summit.
The links between UAE and China were strengthened during the infrastructure boom. The Middle East is currently going through the kind of large scale infrastructure development that China experienced in the 1990s and early…
