This is an excerpt from Al-Monitor Gulf, our weekly newsletter covering the big stories across the Gulf. To get it directly to your inbox, sign up here.

As China eyes direct channels to Gulf investors, the local equity markets are emerging as a “critical gateway” between the two regions for billions of dollars worth of capital flows.

The United Arab Emirates' stock markets hit $1 trillion in market capitalization for the first time last week, nearly five times their valuation at the height of the COVID-19 pandemic in 2020. The trend is driven by corporate earnings growth and a flurry of listings in recent years that have attracted investors and boosted the UAE’s stature as a financial hub.

The rising appeal of Gulf capital markets is not limited to stakes in the region’s economy, it is complemented by the listing of debts issued by foreign entities. Last Thursday, Nasdaq Dubai announced the listing of two bonds by China’s Ministry of Finance, worth a total of $2 billion. The transaction follows a similar move in Saudi Arabia, the other Gulf financial hub. Earlier this month, China issued sovereign bonds in US dollars in Riyadh, a first since 2021 when Beijing sold $4 billion worth of foreign currency bonds in Hong Kong.