Asia’s first Saudi Arabia ETF makes a successful debut in Hong Kong at a milestone event for stronger market and financial ties between China and the Middle East

“The listing shows the formation of a partnership between the Middle East and Hong Kong and mainland China,” said Rajeev Mittal, managing director for Asia Pacific ex-Japan at Fidelity International. “There is a strong common interest in the two regions.”

Saudi Aramco is the second largest constituent in the FTSE Saudi Arabia Index and has a weighting of 9.88 percent. Photo: Reuters

Wednesday’s trading was marked by the traditional striking of the gong in the Connect Hall in Central. Finance Minister Paul Chan Mo-po, Public Investment Fund (PIF) Deputy Governor Yazeed AlHumied, HKEX CEO Nicolas Aguzin, Securities and Futures Commission Chairman Tim Lui, CSOP CEO Ding Chen and Luanne Lim, CEO of HSBC Hong Kong, attended the ceremony.

The listing preceded the first FII Priority Conference, a meeting of senior officials from Saudi Arabia and Hong Kong on December 7 and 8 as both governments seek to deepen economic and business cooperation. FII, which stands for Future Investment Initiative, is supported by PIF, Saudis $700 billion sovereign wealth fund.

FII selects SCMP as media partner for its first summit in Hong Kong

China views Saudi Arabia as a key ally in President Xi Jinping’s Belt and Road Initiative (BRI) for infrastructure investment and trade. The Middle Eastern country had previously agreed to settle trade payments in yuan, helping to promote its use worldwide. Their central banks recently signed a bilateral currency swap to strengthen these relationships.

As a key BRI region, “the listing heralds a new chapter of long-term financial cooperation between the two markets,” said Louis Lau, partner at KPMG. “It further consolidates Hong Kong’s strategic role as an important link between mainland China and the Middle East and increases Hong Kong’s attractiveness to the capital market.”

CSOP’s Saudi ETF provides an indirect single market by reflecting the 56 stocks of the FTSE index, which had a combined market capitalization of $276.8 billion as of October 31. These include Al Rajhi Banking, Saudi Aramco, Saudi National Bank, Saudi Basic Industries and Saudi Telecom top five members, accounting for 45 percent of the index weight.

The central banks of China and Saudi Arabia sign a currency swap agreement to boost trade

According to Bloomberg data, the FTSE index has returned 4.6 percent in dollar terms this year, while the Hang Seng index has fallen 11.2 percent. The Saudi Stock Exchange is the seventh largest stock exchange in the world with 230 listings and a market value of around $3 trillion. The broader Tadawul All-Share index rose 5.8 percent in local currency terms.

The Saudi ETF is expected to announce initiatives to further promote mutual access between Hong Kong and Saudi Arabia. The listing was only made possible afterwards HKEX has added Tadawul as a recognized exchangewhich makes the shares investable for local funds and private investors.The Saudi ETF is a landmark development as Asian investors gain access to Saudi Arabia’s economic growth, says Finance Minister Paul Chan. Photo: Jelly Tse

“The launch is a significant milestone,” Chan said in a statement. “It enables mass market investors in our part of the world to invest and participate in the development of Saudi Arabia’s economy, allowing them to capitalize on the enormous opportunities of the country’s bright and promising future.”

Saudi Arabia is the world’s largest oil exporter and its economy grew 8.7 percent to over $1 trillion in 2022. As part of its “Vision 2030” plan presented in 2016, the government wants to reduce its dependence on oil revenues and promote investments in, among other things, healthcare, infrastructure and tourism.

The CSOP Saudi ETF is the first such vehicle to be listed in Asia. Similar ETFs have also launched and traded in New York, including the $725.6 million iShares MSCI Saudi Arabia ETF managed by BlackRock and the $17.2 million Franklin FTSE Saudi Arabia ETF managed by Templeton. Dollar.

“The listing of the Saudi ETF is a milestone as it is the first time for Hong Kong retail investors to be able to trade with Saudi Aramco or other largest Saudi companies [in a basket of stocks]“said Financial Services Legislator Robert Lee Wai-wang. It also offers a new investment opportunity and could help boost market sales, said Lee, who is also CEO of local brokerage Grand Capital Holdings.

Additional reporting by Li Jiaxing