First Hong Kong ETF in Saudi Arabia Raises $1.3 Billion in Investment

Saudi Arabia has made a landmark entry into global equity markets with the introduction of its first exchange-traded fund (ETF) tracking Hong Kong stocks. Known as the Albilad CSOP MSCI Hong Kong China Equity ETF, the fund has raised an impressive $1.3 billion since its October 23 launch. The fund‘s popularity, according to CSOP Asset Management CEO Ding Chen, shows Saudi investors’ growing appetite for Hong Kong stocks and their belief in Chinas continued economic growth.

The Albilad ETF is a joint venture between CSOP Asset Management, based in Hong Kong, and Albilad Capital in Saudi Arabia. This collaboration allows Saudi investors to access the 30 largest Sharia-compliant companies listed in Hong Kong. By following Islamic principles, the ETF excludes companies that earn revenue from loans, entertainment, or pork-related businesses, aligning the funds investments with local investor preferences.

As the first ETF in Saudi Arabia to track Hong Kong stocks, Albilad CSOP MSCI Hong Kong China Equity ETF has attracted widespread attention. With a minimum investment of just 10 Saudi riyals (US$2.66), the ETF offers affordable entry into a diverse portfolio of large-cap Hong Kong-listed companies, including names like Meituan, Techtronic, and Anta Sports. These companies have weightings of 11.4%, 7.4%, and 6.8%, respectively, in the funds holdings, which only include large companies that meet Sharia compliance.

Middle Eastern investors have displayed strong interest in this ETF, as demonstrated during CSOP‘s roadshow promoting the fund. Ding noted that the recent surge in the Hong Kong market, driven by China’s economic stimulus measures and a reduction in U.S. interest rates, has bolstered international investors‘ confidence in Hong Kong’s long-term economic prospects.

The success of the Albilad ETF also marks a significant step toward strengthening ties between Saudi Arabia and Hong Kong. The collaboration between these markets has been an evolving relationship. Last year, CSOP launched a Saudi-focused ETF in Hong Kong, allowing investors in the city access to Tadawul-listed stocks and further opening the door to cross-border investments. As Saudi Arabia continues its Vision 2030 initiative to diversify its economy, the Albilad ETF‘s listing represents an essential part of the country’s strategy to grow its financial market offerings beyond oil.

The MSCI HK China Connect Select Index, which the Albilad ETF tracks, outperformed the Hang Seng Index from 2018 to 2021. Although it underperformed over the past two years, recent developments like Chinas stimulus package have sparked renewed interest, propelling the Hang Seng Index by 18% in September.

Albilad Capital CEO Zaid AlMufarih sees this ETF as an essential addition to Saudi Arabias financial offerings. He described the Albilad ETF as a unique investment option that brings exposure to the rapidly growing Chinese market, known for its low correlation with major global markets, making it a valuable tool for portfolio diversification.

The Albilad ETF listing ceremony on Wednesday, October 25, on the Saudi Stock Exchange (Tadawul), will be attended by a high-profile delegation of 85 officials and business leaders from Hong Kong. The delegation includes Financial Secretary Paul Chan Mo-po and Hong Kong Exchanges and Clearing Chairman Carlson Tong Ka-Shing, all of whom are attending the Future Investment Initiative forum in Riyadh. Unlike traditional Hong Kong ceremonies where gongs are struck, Tadawul will mark the event with a button press and bell ringing at 10 a.m. to signify the start of trading.

A day after the Albilad ETF debuts, Tadawul is set to list another Hong Kong-based ETF, SAB Invest Hang Seng Hong Kong ETF, introduced by SAB Invest, a subsidiary of Saudi Awwal Bank. The release of these ETFs marks a robust expansion of Saudi Arabias capital market, diversifying its range of financial products and aligning with its economic goals under Vision 2030.

Final Thoughts

The success of the Albilad ETF highlights the growing interest from Middle Eastern investors in Hong Kong‘s stock market and China’s economic potential. This partnership between Hong Kong and Saudi Arabia is not only a testament to the evolving economic relationship but also a strategic step in Saudi Arabias journey to diversify its financial markets. The introduction of such investment tools provides Saudi investors with new opportunities for growth and opens doors for broader collaboration with global markets.