Saudi Arabia and Hong Kong Strengthen ETF Ties
Saudi Arabia’s first ETFs focused on Hong Kong’s equities market are set to be listed on the local stock exchange by year-end, aiming to bolster financial connections between the two regions.
Hong Kong’s financial secretary, Paul Chan, announced at the Bund Summit in Shanghai that reciprocal actions, including the listing of Hong Kong-focused ETFs on the Saudi Exchange, are anticipated this year.
The CSOP Saudi Arabia ETF, tracking the FTSE Saudi Arabia Index, was the first ETF with single-country exposure to the Saudi market in the Asia Pacific. Launched last November on the Hong Kong exchange, it initially attracted $1bn, growing to $1.25bn.
Rebecca Sin from Bloomberg Intelligence indicated that CSOP plans to list a feeder fund for its Hong Kong ETFs in Saudi Arabia by mid-2024. In July, CSOP launched the first sharia-compliant ETF in Greater China, the CSOP MSCI HK China Connect Select ETF, offering exposure to Hong Kong-listed H shares and mainland China A-shares while adhering to sharia principles.
Mainland Chinese and Hong Kong regulators have shown interest in listing ETF products on the Saudi bourse. Sin mentioned that the CSOP MSCI HK China Connect Select fund is a potential candidate for such listings.
A Hong Kong ETF listed in Saudi Arabia could attract significant investment, potentially up to $100mn from large institutional investors like Saudi Arabia’s Public Investment Fund. Currently, the Saudi exchange lists nine ETFs with a total of $56mn in assets.
The Saudi exchange is rapidly targeting Asian markets to expand its capital markets. In May, Michael Wong Wai-lun, Hong Kong’s deputy financial secretary, stated that Hong Kong is working with Saudi officials to launch an ETF tracking domestic stock indices, enhancing capital flows between the markets.