01 November 2023
It is fair to say that the Hong Kong authorities have been extremely proactive since the launch of their first ETF in 1999. At the time, this was a means of selling off shares accumulated by the authorities during various stock market interventions. However, the sector has come on leaps and bounds since then, and today's rumour of a Saudi Arabian-based ETF has caught the attention of many investors.
The APAC region is, like many others around the world, extending the hand of investor friendship to Saudi Arabia. An official Chinese party recently visited Saudi Arabia, and early this year, Hong Kong accepted the Saudi exchange as a recognised stock exchange. This has opened the way to potentially colossal trade and investment partnerships, which certainly bodes well for the future for both parties.
The benefits of ETFs are simple: the ability to trade funds focused on perhaps an index, sector or group of companies, as you would a share. Seen as a hybrid of mutual funds and individual stocks, because ETFs are traded in real-time, they are highly liquid. This has obvious attractions for private investors but also larger investment houses.
There are now 175 ETFs trading in Hong Kong, with a combined market value of circa $50 billion and a daily turnover of $1.5 billion. Interestingly, over the last year, there has been a 30% increase in daily turnover, which reflects growing investor interest in this area.
While we await confirmation, there are strong rumours that CSOP Asset Management is on the verge of launching an ETF focused on Saudi Arabia. The fund will invest in the top 50 largest companies in Saudi Arabia, with Riyadh now recognised as the seventh largest stock market in the world. This will take in sectors such as finance, energy and raw materials and comes at a time when the Saudi Arabian authorities are looking to diversify away from oil.
The forthcoming ETF issue is the start of a cooperation programme between Hong Kong and the Middle East. This will see considerable increases in trade but also place Hong Kong, with more ETFs likely to follow, as the investment gateway to the Middle East. This comes on the back of several huge deals signed by the Chinese authorities concerning technology and energy industries.
The Hong Kong authorities, backed by China, have been incredibly proactive concerning growth in the Hong Kong exchange and its global reach. We also know that cross-stock listings between China and Saudi Arabia are on the cards after the recent signing of a memorandum of understanding.
The news, albeit yet to be confirmed, of a Hong Kong-based ETF investing in Saudi Arabian stocks is hugely positive. It is no secret that relations between China, Hong Kong and Saudi Arabia are very positive, with all parties taking a proactive approach to future cooperation. This latest move will help Saudi Arabian companies tap into the Far East, and investors gain access to Saudi Arabian stocks. This must surely be a win-win for all parties?Back to News