CSOP Saudi Arabia ETF, the first exchange-traded fund in Asia that tracks the Middle East’s biggest companies including Saudi Aramco, made a winning debut in Hong Kong in a milestone listing underpinning stronger ties between Hong Kong and Middle East financial markets.
The Saudi ETF, managed by CSOP Asset Management, rose by 0.9 per cent to HK$77.60 per board lot of 10 units in Hong Kong at 9.34am local time, and by 0.3 per cent to 70.88 yuan. They trade under the 2830 and 82830 stock codes, respectively.
The fund, which tracks the FTSE Saudi Arabia Index accessible to foreign investors, is based in Saudi’s riyals. Its net asset value was indicated at about HK$76.92 or 70.64 yuan on November 28, according to an exchange filing. HSBC Institutional Trust Services is the trustee for the fund.
“The listing shows the formation of a partnership between the Middle East and Hong Kong and mainland China as well,” said Rajeev Mittal, managing director for Asia-Pacific ex-Japan at Fidelity International. “There is a strong commonality of interest in the two regions.”
Saudi Aramco is the second largest constituent in the FTSE Saudi Arabia Index, and has a 9.88 per cent weightage. Photo: Reuters
Wednesday’s trading was marked by the traditional striking of a ceremonial gong at the Connect Hall in Central. Financial Secretary Paul Chan Mo-po, Public Investment Fund (PIF)’s deputy governor Yazeed AlHumied, HKEX CEO Nicolas Aguzin, Securities and Futures Commission Chairman Tim Lui and CSOP CEO Ding Chen and HSBC Hong Kong CEO Luanne Lim attended the ceremony.
The listing preceded the first FII Priority Conference, a gathering of high-power officials from Saudi Arabia and Hong Kong on December 7 and 8 as both governments look to deepen their economic and business cooperation. FII, which stands for Future Investment Initiative, is backed by PIF, Saudi’s US$700 billion sovereign wealth fund.
China views Saudi Arabia as an important ally in President Xi Jinping’s Belt and Road Initiative (BRI) of infrastructure investments and trade. The Middle East country earlier agreed to settle trade payments in yuan, helping promote its worldwide use. Their central banks recently signed a bilateral currency swap to enhance those ties.
As a vital BRI region, “the listing ushers in a new chapter of long-term financial cooperation between the two markets,” said Louis Lau, a partner at KPMG. “It further cements Hong Kong’s strategic role as an important conduit between mainland China and the Middle East, enhancing Hong Kong’s capital market appeal.”
CSOP’s Saudi ETF offers an indirect single-market by mirroring the FTSE index’s 56 stocks, which had a combined market capitalisation of US$276.8 billion on October 31. Al Rajhi Banking, Saudi Aramco, Saudi National Bank, Saudi Basic Industries and Saudi Telecom are its top five members, making up 45 per cent of index weightage.
The FTSE index has returned 4.6 per cent this year in US dollar terms, while the Hang Seng Index has fallen 11.2 per cent, according to Bloomberg data. The Saudi bourse is the world’s seventh largest stock exchange with 230 listings commanding about US$3 trillion in market value. The broader Tadawul All-Share Index has risen 5.8 per cent in local currency terms.
The Saudi ETF is likely to presage initiatives to further foster mutual access between Hong Kong and Saudi Arabia. The listing was made possible after HKEX added Tadawul as a recognised stock exchange, making the equities investible for local funds and retail investors.
The Saudi ETF is a milestone development as Asian investors will have access to Saudi Arabia’s economic growth, Financial Secretary Paul Chan says. Photo: Jelly Tse
“The launch is a significant milestone,” Chan said in a statement. “It makes possible for mass market investors in our part of the world to invest and participate in the development of the Saudi Arabia’s economy, allowing them to benefit from the vast opportunities of the country’s bright and promising future.”
Saudi Arabia is the world’s biggest oil exporter and its economy expanded 8.7 per cent in 2022 to exceed US$1 trillion in size. Under its “Vision 2030” plan unveiled in 2016, the government wants to cut its reliance on oil income and promote investments in healthcare, infrastructure and tourism, among others.
The CSOP Saudi ETF is the first such vehicle to be listed in Asia. Similar ETFs have also been launched and traded in New York, including the US$725.6 million iShares MSCI Saudi Arabia ETF managed by BlackRock and the US$17.2 million Franklin FTSE Saudi Arabia ETF run by Templeton.
“The listing of the Saudi ETF is a milestone as it is the first time for Hong Kong individual investors are able to trade Saudi Aramco or other largest Saudi companies [in a basket of stocks],” said Robert Lee Wai-wang, lawmaker for the financial services sector. It also provides a new investment choice and can help boost market turnover, said Lee, who is also the CEO of local brokerage Grand Capital Holdings.
Additional reporting by Li Jiaxing
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