Is Saudi Arabia’s wealth fund tipping towards China?

Saudi Arabia’s sovereign wealth fund may be poised to start making major investments in Chinese companies, after so far mostly limiting its overseas holdings to the U.S. and Europe.

The $450 billion Public Investment Fund has applied for a Qualified Foreign Institutional Investor license in China, according to information published on the website of the country’s top securities regulator. That will give it the ability to directly trade renminbi-denominated stocks, rather than having to go through third parties.

A tilt toward China would make sense for the kingdom as it looks to develop economic ties through investment by its sovereign fund. China is the kingdom’s biggest trading partner and a top customer for Saudi Aramco, which is chaired by PIF Governor Yasir Al Rumayyan.

Many global investors are warming up to China’s battered stocks amid bets that Beijing’s regulatory overhaul has potentially peaked. The world’s second-biggest economy has also been an appealing destination for sovereign investors, with Russia’s wealth fund converting billions of its dollar holdings into yuan as part of an effort to make the country less vulnerable to sanctions.

$2 Trillion Goal

The PIF, which hasn’t disclosed any investments in China, has ambitions to control $2 trillion of assets and become a global investment powerhouse.

But since unveiling a plan to transform itself from a sleepy, domestically focused holding company five years ago, its publicly disclosed investments have mostly been in the U.S. and Europe.

Its first major international deal was a $3.5 billion investment in Uber Technologies Inc. in 2016. More recently it backed Lucid Motors Inc. before it went public through a deal with a special purpose acquisition company.

Last March, as global markets crashed amid the onset of the coronavirus pandemic, the PIF got a $40 billion transfer from the kingdom’s reserves to bet that stocks would recover quickly.

It disclosed $10.1 billion worth of stakes in U.S.-listed firms including Walt Disney Co., BP Plc., and Boeing Co., at the end of June last year, and then sold off most of them three months later as markets soared.

–With assistance from Belinda Cao.