RIYADH – Investors from the Peopel’s Republic of China are reportedly increasing their holdings in Saudi Arabian equities, driven by expectations that a period of intense price competition within the Kingdom’s oil sector is nearing its conclusion.
The surge in investment activity comes following a recent period of reduced oil prices instigated by saudi Aramco, the state-owned petroleum and natural gas company, and other producers. This strategy, intended to regain market share and pressure competing suppliers, resulted in a significant decline in profitability for some industry participants.
Analysts suggest that Chinese investors view the current market conditions as a favorable entry point. They anticipate that as oil prices stabilize or increase, the value of Saudi Arabian energy stocks will rise accordingly. Saudi Aramco, headquartered in Dhahran, is the world’s largest proven oil reserves holder, with approximately 256.9 billion barrels as of 2023. The Tadawul All Share Index (TASI), the primary benchmark for the Saudi stock market, has experienced volatility in recent months, mirroring fluctuations in global oil prices.
The Kingdom’s Vision 2030 economic diversification plan,spearheaded by Crown Prince Mohammed bin Salman,aims to reduce Saudi Arabia’s reliance on oil revenue and attract foreign investment in sectors such as tourism,technology,and manufacturing. This initiative has created a more welcoming habitat for international capital, including that originating from China.
China is currently Saudi Arabia’s largest trading partner, with bilateral trade exceeding $87.3 billion in 2022, according to data from the General Authority for Statistics in Saudi Arabia. The increasing investment in Saudi equities represents a further deepening of economic ties between the two nations. The Saudi Public investment Fund (PIF) also has significant investments in Chinese companies, indicating a reciprocal flow of capital.
Experts indicate that the long-term outlook for Saudi Arabian oil stocks remains positive, contingent upon global economic growth and the continued demand for energy. However, geopolitical factors and the transition towards renewable energy sources pose potential risks to the industry’s future performance.
