Asia's first ETF tracking Saudi equities debuts in Hong Kong

Bull statues in front of screens showing Hong Kong stock prices outside Exchange Square, in Hong Kong, China, August 18, 2023. REUTERS/Tyrone Siu/File Photo

HONG KONG: A new exchange-traded fund (ETF) tracking Saudi equities made its trading debut in Hong Kong on Wednesday, becoming the first product of its kind in Asia amid warming bilateral relations between China and Saudi Arabia.

The ETF, called CSOP Saudi Arabia ETF, is managed by Hong Kong-based CSOP Asset Management. It counts Saudi sovereign wealth fund, Public Investment Fund (PIF), as an anchor investor, CSOP said in a press release.

The fund price rose 0.9% on its debut, while the broader Hong Kong market index was down more than 2%.

"It (the ETF) makes it possible for mass investors in our part of the world to invest and participate in the development of the Saudi Arabia's economy," said Hong Kong Financial Secretary Paul Chan at a launch event.

"We can expect to see more products to be made available in both the Hong Kong and the Saudi markets for our respective investor bases."

The fund tracks the performance of the FTSE Saudi Arabia Index, whose 56 constituents' total market value reached $276.8 billion at end-October. The index posted a return of 45.3% over the past three years, according to a CSOP statement.

Through the ETF, investors in Hong Kong will be able to trade Saudi stocks including the oil giant Saudi Aramco and the Saudi National Bank in Hong Kong dollars or Chinese yuan.

"Our aim is to continue to attract foreign investors into the Saudi capital markets... To show our commitment, PIF would act as the lead investor of this fund," said PIF Deputy Governor Yazeed A. Al-Humied at the launch event.

HSBC, which is offering services including trustee and custodianship to the fund, said it expected assets under management of the fund to surpass $1 billion.

Reuters reported in August that the Hong Kong Stock Exchange and a mainland bourse were in separate talks with the Saudi stock exchange for pacts that would allow investors on both sides to trade equities and bonds in each other's markets.

The ETF launch comes as China's government, frustrated by what it sees as the U.S. weaponisation of economic policies, has sought to expand ties with countries in Europe, the Middle East and Africa.

That diplomatic push includes courting U.S. ally Saudi Arabia.

While economic cooperation between Beijing and Riyadh remains anchored on energy interests, ties in trade, investment and security have been expanding. China is Saudi Arabia's top trading partner with trade worth $87.3 billion in 2021.

The People's Bank of China and the Saudi Central Bank this month signed a local currency swap agreement worth 50 billion yuan ($6.93 billion) or 26 billion Saudi riyals, to strengthen financial cooperation, and promote trade and investment. - Reuters

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