Geopolitical risks are intensifying, can the Hong Kong stock market become a "safe haven" for Middle Eastern giants?

Water flows to the "lower place", money goes to the "stable place". China's Hong Kong is expected to become an ideal haven for capital seeking refuge once again. On March 1, the Financial Secretary of the Hong Kong Special Administrative Region Government, Paul Chan Mo-po, stated, "Middle Eastern funds may seek security and choose Hong Kong, and Hong Kong has made sufficient preparations." He pointed out that there is not much direct trade and investment between Hong Kong and Iran, but the war-related uncertainties have a significant impact globally. It is estimated that due to the Middle East conflict, financial markets may experience significant volatility, capital flows may shift faster, and there may be uncertainties. Local funds may seek a "safe haven" and come to Hong Kong. The government must make adequate preparations and carefully handle financial risks. Behind these words, the Financial Secretary expresses his forward-looking judgment on the impact of geopolitical risks on the flow of capital. On February 28, 2026, the United States and Israel launched a military operation against Iran, causing the core geopolitical risks in the Middle East to reach a peak instantly. This action caused severe turbulence in the global financial markets, with oil and gold prices soaring in the short term, and the cost and uncertainty of international trade and shipping skyrocketing. Local funds in the Middle East (including Iran and Gulf countries) are accelerating their search for offshore assets that are neutral, stable, and freely movable in order to avoid the risks of warfare and sanctions. The preference for Hong Kong as a "safe haven" for capital is not baseless. Looking back to the period of the Iraq War in 2003, when uncertainty about the war was at its highest, international funds had already taken action. Data from J.P. Morgan Chase Bank (one of the largest fund custodians globally) shows that from the end of December 2002 to March 2003, international funds continued to flow into Hong Kong stocks, accumulating up to 6% of the total market value of Hong Kong stocks, which is approximately HK$200 billion. With such a large influx of funds, it is evident that Hong Kong was seen by international capital as a forward-looking safe haven to avoid global geopolitical risks. Why Hong Kong? In the context of escalating tensions between Iran and the United States leading to military conflict, Hong Kong is considered the best choice to attract refuge capital, primarily due to its dual roles as a "safe haven" and a "value appreciation" ground. 1. Short-term safe haven: Security brought by institutions and geopolitical factors (not directly affected by conflicts, with the backing of national stability). On one hand, as Financial Secretary Paul Chan Mo-po mentioned, the direct economic and trade links between Hong Kong and conflict areas are limited, resulting in minimal direct impact. More importantly, Hong Kong has a sound legal system, free capital flow, and a linked exchange rate system. The local government has also explicitly stated that it has sufficient measures in place to deal with market fluctuations. This high level of "certainty" is extremely scarce in the midst of global turmoil. For example, in terms of the legal system and institutions, Hong Kong's stable legal system and the "one country, two systems" policy provide international capital with a high level of certainty. With its free port status and no exchange controls, Hong Kong is one of the few completely open financial hubs globally. In terms of the financial system, Hong Kong's stock market, foreign exchange market, gold market, bond market, and wealth management market are top-tier globally, capable of handling huge amounts of funds without pressure. Additionally, Hong Kong is the largest offshore renminbi center globally, which allows for the hedging of renminbi assets against US dollar risks and meets the demand for "de-dollarization" allocations. On the other hand, Hong Kong's stability is anchored by its connection to the mainland when conflicts arise around the world, China's stable development becomes a cornerstone of the global economy. As an international financial center of China, Hong Kong naturally inherits this core advantage and becomes an important base for global capital to evade risks. 2. Long-term value appreciation ground: Diversified value appreciation asset allocation to help capital grow amidst opportunities. According to GMTEight, the Hong Kong market offers a complete range of safe-haven assets, including gold, US dollar/Hong Kong dollar cash, high dividend Hong Kong stocks, US dollar bonds, savings insurance, etc., providing a solid foundation for capital appreciation. Taking into account the data, as of the end of November 2025, Hong Kong's Finance Minister Paul Chan Mo-po pointed out that, influenced by geopolitical factors, global investors are reassessing and diversifying asset risks, making Hong Kong an important safe haven for funds. The data shows that total bank deposits in Hong Kong had increased by more than 10% in 2025, surpassing HK$19 trillion. At the same time, the IPO fundraising activities led the global ranking, with 80 companies IPO'ing in the first ten months of 2025, raising over US$26 billion, ranking first globally. The international favor towards the Hong Kong market is evident. Moreover, according to the 10th Hong Kong Wealth Management Annual Report, the scale of assets under management in Hong Kong's private wealth management sector has exceeded HK$10.4 trillion, with a 15% annual growth. Among which, mainland funds accounted for 57%, and it is expected to rise to 63% in five years. With this background, Hong Kong, with its common law system under "one country, two systems," free flow of capital, stable linked exchange rate system, and efficient connection with the mainland market, is poised to become the optimal solution for Middle Eastern capital seeking security in times of turmoil. What investment directions do Middle Eastern investors prefer? It is worth noting that in the past year, the pace of Middle Eastern funds flowing into Hong Kong has increased significantly, transitioning from initial exploration to strategic deep deployment. In terms of fund flow, it mainly covers the following four characteristics: first, a long-money nature, sovereign wealth funds as the main actors, with a lock-up period of six months or longer, preferring long-term allocations. Second, concentration in IPO: according to Wind data statistics on January 24, the average subscription ratio of cornerstone investors in HKEX has climbed to 39.15%, reaching a two-year high, with frequent appearances of Middle Eastern sovereign wealth funds. Third, mutual access: Saudi Arabia launched its first Hong Kong ETF; Hong Kong issued US$3 billion Islamic bonds. Finally, the rise of family offices, with over 2,700 Middle Eastern family offices, with private equity allocations reaching 25%. For instance, in terms of sovereign wealth funds, the Saudi Public Investment Fund (PIF) and the Hong Kong Monetary Authority jointly launched a US$1 billion investment fund, upgrading from financial investment to strategic cooperation, deeply entwining regional development. In terms of financing activities, Middle Eastern capital has frequently engaged, locking in high-quality assets in China. For example, the Contemporary Amperex Technology's Hong Kong IPO attracted investment from the Kuwait Investment Authority as a cornerstone investor, while the IPOs of MiniMax and Sinocare Medical attracted investment from the Abu Dhabi Investment Authority as cornerstone investors, and the IPO of Eastroc Beverage attracted investment from Qatar as a cornerstone investor. In terms of investment preferences, Middle Eastern capital has shifted from traditional sectors like energy, infrastructure, and banking to cutting-edge sectors such as semiconductors, AI, and biopharmaceuticals. According to various institutions, the key sectors where Middle Eastern capital has focused its investments in China in 2025 include: healthcare, such as Qatar Investment Authority's acquisition of KANGJI MEDICAL and Abu Dhabi Investment Authority's investment in Sinocare Medical; Siasun Robot & Automation/AI, such as MiniMax; and new energy/new materials, such as Wanhua Chemical Group (Kuwait Petrochemical's US$638 million investment) and joint ventures between Saudi Aramco and Sinopec. From the above data, it is clear that as the proportion of Middle Eastern capital in the Hong Kong market management increases significantly, their long-term trust in the Hong Kong market is evident. Based on the current foundation of cooperation and policy trends, the future trends of Middle Eastern funds in Hong Kong may present a deeper integration. For example, sovereign wealth funds increasing their allocations, expanding investment areas: Middle Eastern sovereign wealth funds such as PIF and ADIA are expected to further increase their allocations to Hong Kong stocks and renminbi assets. The investment scope will expand from technology, new energy, and a few other sectors to a broader range of industries including infrastructure, healthcare, and consumption. In addition, with the improvement of financial infrastructure (such as the upgrade of the CMU system), Hong Kong is actively developing into an Islamic financial center for the Greater China region. It may witness the innovation of the first large-scale Islamic bond or related financial products listed in Hong Kong, providing Middle Eastern funds with investment tools that better align with their cultural habits. Family offices are also likely to accelerate their entry, as the Middle East region has a large number of family offices that prefer to invest in physical assets such as land and infrastructure. Hong Kong, as a leading global wealth management center, will attract more of these funds to set up offices here and invest in projects in the mainland and Asia through the Hong Kong platform. Furthermore, Hong Kong may also serve as a hub for the return of "petrodollars". As China and the Middle East increasingly settle their oil and gas trades using the renminbi, Hong Kong's status as the world's largest offshore renminbi center will make it a core platform for the diversification and appreciation of these "petrodollars". In conclusion, amidst the escalating geopolitical risks in the "chaotic situation," China's Hong Kong is becoming a super safe haven for global capital with a combination of institutional resilience, market opportunities, and national endorsement.