Yicai | Overseas Sovereign Wealth Funds Expands A-share Allocation, Abu Dhabi Investment Authority and Temasek Both Boost Positions in the Third Quarter

Translated from Yicai

The recently released third quarter report of A-shares reveals a significant surge in holdings by overseas sovereign wealth funds. According to the QFII data of the top ten shareholders disclosed in the third quarter report, Abu Dhabi Investment Authority, the largest sovereign wealth fund in the Middle East, witnessed a 30.0% increase in A-share holdings compared to the previous quarter.

By the end of the third quarter, Abu Dhabi Investment Authority held shares in 24 A-share listed companies, totaling 537 million shares. The mid-year report indicates that these two figures were 26 companies and 479 million shares, respectively. While clearing 2 stocks, the Abu Dhabi Investment Authority continued to increase its allocation of A-shares in the third quarter.

Abu Dhabi Investment Authority shows a preference for prominent companies in the A-share sectors of non-ferrous metals, power equipment, and industrial manufacturing. During the reporting period, the top 5 companies in terms of shareholding quantity for this sovereign wealth fund were Zijin Mining Group Company Limited (601899.SH), Bank of China Limited (601988.SH), Tonghua Dongbao Pharmaceutical Co., Ltd. (600867.SH), Yunnan Aluminium Co., Ltd. (000807.SH), and TCL Zhonghuan Renewable Energy Technology Co., Ltd. (002129.SZ). Notably, Bank of China Limited, Yunnan Aluminium Co., Ltd., and TCL Zhonghuan Renewable Energy Technology Co., Ltd. (TCL Zhonghuan) were newly acquired positions for the fund.

Following their substantial acquisition of 150 million shares of Zijin Mining Group Company Limited in the second quarter, Abu Dhabi Investment Authority further expanded its holdings by 2.9983 million shares in the third quarter. This brought its total to 153 million shares and positioned it as the eighth largest shareholder of tradable shares. In the chemical industry, Abu Dhabi Investment Authority made a fresh investment by purchasing 19.3477 million shares in the prominent company Wanhua Chemical Group Co., Ltd. (600309.SH), making it the sixth company in terms of shareholding.

However, investors were taken aback by the unexpected decision of Abu Dhabi Investment Authority to purchase 23.0826 million shares in TCL Zhonghuan. The photovoltaic industry chain is currently facing a continuous decrease in prices, resulting in a sharp narrowing of the profit margins of silicon material and silicon wafer sectors. This has led to an accumulation of uncertainty regarding the industry's development trends. TCL Zhonghuan, the leading silicon wafer company, experienced a decline of over 20% in both operating revenue and net profit during the third quarter. Since the beginning of the fourth quarter, the photovoltaic sector has continued its downward trend unilaterally, causing TCL Zhonghuan's stock price to drop by 20.1%, lower than the cost of acquiring these shares. The outcome of Abu Dhabi Investment Authority's investment in this case remains uncertain.

Another Middle Eastern sovereign wealth fund, the Kuwait Investment Authority, had shares in 26 A-share listed companies at the end of the third quarter. This was a decrease of 11 companies compared to the mid-year report, with the total number of shares held decreasing from 313 million to 248 million. However, for some fundamentally sound stocks, the Kuwait Investment Authority continued to increase its positions. It added 3.9 million shares in Shenzhen Topband Co., Ltd., 3.34 million shares in Zhejiang CONBA Pharmaceutical Co., Ltd., 2.9 million shares in Guangdong Chj Industry Co., Ltd., and 2.84 million shares in Shanghai Zhonggu Logistics Co., Ltd.

Public data shows that the market value of A shares held by the Abu Dhabi Investment Authority and by Temasek, one of the world’s top 10 sovereign wealth funds, is RMB 9.51 billion and RMB 6.25 billion respectively. This accounts for approximately 11% of the A-share market value of RMB 141.8 billion held by QFIIs. Notably, Temasek's A-share holdings increased by 54.3% compared to the previous quarter.