Middle Eastern funds return to Hong Kong in large scale, what are they buying?

Ask AI · Why Are Middle Eastern Funds Suddenly Favoring the Hong Kong Market?

Source: Tuchong

On March 16, the Asia-Pacific markets once again showed a clear divergence.

In the early trading session, while Japanese and Korean stocks surged then pulled back, the three major Hong Kong indices hit bottom and then collectively rallied strongly.

By the close, the Hang Seng Index rose 1.45%, the Hang Seng Tech Index gained 2.69%, and sectors such as semiconductors, energy storage, automotive, and pharmaceuticals saw significant gains. Several traditional consumer sectors also experienced noticeable increases.

Today, two pieces of news have stirred the investment community:

One is Wall Street legend “Big Short” Michael Burry, who rarely speaks publicly on social media, stating: “The plunge in the Hang Seng Tech Index is the only case in history caused purely by multiple compression. Even in a bear market, the revenue and profits of its constituent companies remain steadily growing.”

Known for accurately predicting the 2008 subprime mortgage crisis and consistently profiting from short positions, Burry suddenly declared that a certain asset was severely undervalued. His statement carries more weight than a hundred analysts bullish on the market.

The other piece of news is even more intriguing.

According to Hong Kong media reports, some institutions have revealed that recently, inquiries from clients in the Middle East have increased significantly—over 50% month-on-month—with detailed questions ranging from Hong Kong stock investments to bond allocations, insurance products, and specific requirements for establishing family offices in Hong Kong.

Insiders also say that some wealthy Middle Eastern families who moved their businesses to Singapore or Dubai years ago are now quietly considering reallocating some assets back to Hong Kong.

Many interpret this as a short-term bottom-fishing move by Middle Eastern capital, but the reality is far more complex.

Capital always seeks profit and avoids risks. The large-scale return of Middle Eastern funds to Hong Kong strongly signals a major shift: Hong Kong stocks are entering a new, robust market logic.

01. Why Hong Kong Stocks?

First, we need to understand a core question: Why are Middle Eastern funds choosing to return to Hong Kong at this particular time?

The answer centers on Hong Kong’s dual appeal of “risk aversion” and “value appreciation,” hitting all the key points.

In recent years, Dubai and Abu Dhabi have been very prominent.

With vast oil dollar reserves, relaxed regulatory environments, and zero-tax policies, they have attracted wealthy families from around the world.

From Indonesian tobacco magnates to Indian steel tycoons, from European aristocrats to local Middle Eastern oil families, all see these regions as safe havens for wealth.

By 2024, offshore assets registered in the UAE have reached $700 billion.

Among the 2,270 family foundations registered there, about a quarter have Asian backgrounds.

This figure reflects a collective global capital bet on Dubai’s status as a “safe haven.”

But now, the situation has suddenly changed.

With the outbreak of the Israel-Hamas conflict and escalating regional tensions, the conflict has reached this financial hub.

Dubai, once considered a “safe island,” is now shadowed by geopolitical risks, with regional security significantly deteriorating.

Reports indicate that Goldman Sachs and Citibank have asked their Dubai-based staff to suspend office visits, and other financial institutions are offering temporary exit options to employees.

Wealthy individuals holding property, settling families, and safeguarding assets in the Middle East are also forced to seriously consider the security of their vast wealth.

When a region shifts from a “safe harbor” to a “storm eye,” capital is more sensitive than anyone.

They won’t linger anywhere; they will flow to truly safe places.

Hong Kong, with its stable “one country, two systems” environment, comprehensive legal system, and mature financial infrastructure, has become the optimal choice for Middle Eastern capital to hedge geopolitical risks.

China’s energy self-sufficiency rate is 84.4%, with oil reserves lasting 130 days—far above the 90-day international standard—effectively mitigating risks of global energy supply chain disruptions, demonstrating strong economic resilience.

Moreover, China’s steady economy and the explosive growth of the AI industry provide long-term growth momentum for Hong Kong stocks, further boosting Middle Eastern confidence in asset deployment.

As Hong Kong Financial Secretary Paul Chan has said, Hong Kong’s safety, stability, and certainty are especially prominent amid global turbulence, with asset safety margins far higher than in the volatile Persian Gulf region.

More importantly, Hong Kong can meet Middle Eastern capital’s core needs of “risk hedging and value appreciation”:

Most Middle Eastern funds are sovereign wealth funds and family offices that prefer long-term stable cash flows. Hong Kong stocks, with many well-managed, dividend-stable, reasonably valued assets capable of providing ongoing cash flow, perfectly match this demand and can also withstand market volatility.

Additionally, as a key hub connecting Mainland China and the global markets, Hong Kong’s core assets are deeply linked to China’s economy, especially the Hang Seng Tech Index components, which are fully embracing AI transformation.

As of March 2026, the top ten stocks in the index account for nearly 70%, with AI applications making up over 45%. Companies like Meituan, Tencent, and Alibaba have entered commercialization phases for their AI initiatives. This high-certainty growth opportunity is precisely what long-term-oriented Middle Eastern funds seek.

Furthermore, Hong Kong’s zero capital gains tax, inheritance tax, expanded tax benefits for family offices, and a corporate tax rate of 16.5%—lower than Singapore—are highly attractive.

On the valuation front, the Hang Seng Tech Index’s PE ratio is about 21, at the 13th percentile historically, while its constituent companies are expected to see about 15% net profit growth in 2025. This stark contrast between revenue/profit growth and low valuation makes Hong Kong stocks appealing.

In contrast, the US markets are under pressure: rising oil prices due to Strait of Hormuz tensions, inflation expectations, and the Fed’s rate hike pause have caused recent net outflows from US equity funds—$21.92 billion in the past week alone, the worst in eight weeks—shifting capital toward undervalued markets like Hong Kong for risk hedging and value appreciation.

Hong Kong is actively aligning with Middle Eastern capital needs through measures such as issuing $3 billion in Islamic bonds, establishing a $1 billion joint investment fund with Saudi PIF, and the new Capital Investor Entry Scheme effective March 1, which further lowers entry barriers for Middle Eastern investors, creating a “two-way” flow.

Thus, the recent large inflow of Middle Eastern funds into Hong Kong stocks is a logical outcome.

Hong Kong media reports show that inquiries from Middle Eastern clients about Hong Kong stock investments and family office setups have surged over 50% month-on-month, with nearly 30% being large families that migrated to Singapore or Dubai years ago, now planning to reallocate 15-20% of their assets back to Hong Kong.

This trend is just beginning to take shape.

02. What Are Funds Buying?

The return of Middle Eastern capital is not just empty talk; real money is flowing.

Data shows some Middle Eastern sovereign funds are already starting small-scale positions, tentatively investing around HKD 5-8 billion in high-dividend blue-chip and tech giants in Hong Kong.

Beyond secondary market stocks, Middle Eastern funds are increasingly active in primary market IPO cornerstone subscriptions.

Statistics indicate that their participation in Hong Kong IPO cornerstone allocations rose from 18% in 2024 to 39.2% in early 2026. Funds like Mubadala from Abu Dhabi and Kuwait Investment Authority are focusing heavily on Hong Kong.

For example, the IPO of Eastroc Beverage saw Qatar Investment Authority’s indirect wholly owned platform as a cornerstone investor.

In January, Xiyu Technology listed, with 14 cornerstone investors including Abu Dhabi Investment Authority, investing about $350 million. Jingfeng Medical also attracted participation from Abu Dhabi Investment Authority.

Most impressively, these investments have already yielded substantial unrealized gains.

Xiyu Technology’s stock price has soared from HKD 165 at the time of subscription to a peak of HKD 1,200, with a floating profit of over HKD 1,000 per share.

For long-term funds locking in positions for 6 to 12 months, such returns are highly attractive.

These funds are not for short-term speculation but for long-term strategic positioning.

According to a recent report from the Hong Kong Institute of Finance, 91% of surveyed family offices have already established a presence in Hong Kong, with plans to increase risk asset allocations from 54% to 78% over the next three years.

Moreover, the return of Middle Eastern capital to Hong Kong is not an isolated phenomenon.

In fact, besides Middle Eastern capital, southbound funds, passive foreign investment, and long-term Western and European capital are also accelerating their deployment in Hong Kong stocks.

Morgan Stanley data shows that in January 2026, net inflows from the US and Europe into Chinese stocks reached $8.6 billion, a new high since October 2024; participation of European family offices in Hong Kong IPO cornerstone investments is also rising.

The most vigorous inflow comes from southbound funds.

Since 2026, southbound net inflows have exceeded HKD 180 billion, with a record HKD 37.213 billion net purchase on March 9 alone.

In the first week of March, mainland capital poured HKD 52.4 billion into Hong Kong stocks.

From Tencent to Meituan, China Mobile to CNOOC, and from Huahong Semiconductor to WuXi Biologics, southbound funds are almost indiscriminately buying.

03. What Does This Mean?

For ordinary investors, what does the return of Middle Eastern funds to Hong Kong really signify?

First, don’t see this as a short-term market hype. The key fact is: Hong Kong stocks are undergoing a long-term valuation re-rating.

The deployment cycle of Middle Eastern funds typically spans several years. Their entry indicates that the bottom region of Hong Kong stocks is gaining recognition from global capital.

In the long run, with continuous global capital inflows, steady Chinese economic support, and explosive growth in AI industries, valuation recovery in Hong Kong stocks is highly probable.

Second, understanding the strategic focus of these funds helps grasp the certainty of opportunities.

Based on Middle Eastern capital’s allocation logic, three main areas are prioritized:

1. Leading Hang Seng Tech stocks, especially those involved in AI, e-commerce, and cloud computing—these are the core drivers of China’s new economy and long-term growth.

2. High-dividend blue chips. Hong Kong offers many stable, high-growth, undervalued assets that provide steady cash flows, mainly in banking, insurance, energy, utilities, and manufacturing sectors.

Many of these stocks have dividend yields over 6%, far exceeding current international market capital costs. Coupled with expectations of US dollar depreciation and Fed rate cuts, these high-dividend, stable-growth assets are ideal for long-term allocation.

3. Renminbi bonds. As the world’s largest offshore RMB settlement center, Hong Kong’s RMB bond market offers international capital a hedge against dollar risks and a share in RMB asset appreciation, making it an important diversification channel for Middle Eastern funds.

Additionally, Morgan Stanley highlights that core sectors like AI supply chains and innovative pharmaceuticals, which combine growth potential and stability, are key targets for long-term international capital.

These sectors still have enormous growth potential in China, with most companies just beginning their development. The entry of Middle Eastern funds not only reflects recognition from long-term smart capital but also signals a good opportunity for sustained investment.

By aligning with these investment directions and applying personal research and judgment, the success rate of investments will undoubtedly be higher than trying to figure it out alone.

04. Conclusion

Ultimately, the return of Middle Eastern funds to Hong Kong is unlikely to be a simple capital migration; it’s a landmark event indicating a reshaping of the global capital landscape.

It signifies the shifting of global risk centers, the acceleration of de-dollarization, and the re-discovery of Hong Kong’s valuation advantage by global capital.

Of course, this reversal won’t happen overnight.

In the short term, markets will likely remain volatile and bottoming out. The US dollar’s strength may persist, and domestic real estate data still needs validation, all of which could limit the rebound.

For us, this presents both risks and historic opportunities. After all, every major shift in global capital flows hides opportunities for ordinary people to turn the tide.

By understanding the flow of funds and grasping core logic and contrarian signals, leveraging these trends can significantly improve the chances of long-term asset preservation and appreciation.