Mapping Middle Eastern investors fueling Asian tech firms

What do Shein, Lenskart, and Kakao Entertainment have in common?

All three are the subject of IPO chatter, with Shein likely to be furthest along in the process, having confidentially filed to go public in the US.

Beyond that, Tech in Asia’s data shows that the three firms have taken money from Middle Eastern investors, which are playing an increasingly important role in the Asian tech ecosystem.

Impact of energy transition and geopolitics

One factor driving this trend is global energy policy.

Moves to decarbonize and reduce the use of fossil fuels have major oil-producing nations like Saudi Arabia and the United Arab Emirates focused on future-proofing their economies. This includes converting some of their oil wealth into stakes in successful tech companies and developing a thriving tech scene in their own countries.

Geopolitics has played a part as well. The shift to a multipolar world has encouraged investors from the Middle East to look to Asia as an investment destination.

The feeling is mutual.

A task force set up by the Hong Kong government to boost stock market listings has recommended it focus on companies and investors in the Middle East and Southeast Asia.

Moreover, the Hong Kong Exchanges and Clearing Limited recently saw the listing of Asia Pacific’s first exchange-traded fund (ETF) that tracks Saudi Arabian equities.

This means that users in the region will be able to invest in Saudi Arabia-listed stocks through the Hong Kong-traded ETF. The fund is made up of a basket of stocks and trades on an exchange just like a regular stock.

The ETF listing comes as traditional sources of capital from the US and Europe hold back their investments in Hong Kong due to concerns over the deteriorating relationship between the West and China.

While the recent meeting between President Joe Biden and President Xi Jinping may help to put a floor under the US-China relationship, the train has already left the station when it comes to derisking between the countries.

As a result, more Chinese companies are likely to seek funding from alternatives, and a big source of this will be investors from the Middle East who are flush with cash.

3 countries = 69% of investment

For now, Middle Eastern investors appear focused on investing in startups based in China, India, and Singapore. These three countries account for 69% of the number of investee companies in Asia.

This is no surprise considering that the first two have the largest populations in the world while the third serves as a gateway to Southeast Asia.

State-backed and ready to invest