Saudi Arabia opens doors to Hong Kong stocks with launch of 2 ETFs at month-end: SFC CEO

Middle Eastern traders will soon be able to invest in Hong Kong stocks via two exchange-traded funds (ETFs) tracking benchmarks in the city once they are listed on the Saudi stock exchange at the end of this month.

Financial Secretary Paul Chan Mo-po will lead a delegation comprising scores of local regulators and financiers to the FII conference in Riyadh and to mark the launch of the ETFs, according to Julia Leung Fung-yee, CEO of the Securities and Futures Commission (SFC).

"The two ETFs tracking Hong Kong stocks to be listed in the Saudi Stock Exchange will mark an important milestone in the linkage between the capital markets of Hong Kong and Saudi Arabia," Leung said in an interview on Friday.

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She visited Saudi Arabia in June to meet officials and discuss the potential listing of ETFs on each other's exchanges. Saudi Exchange, or Tadawul, is the largest market in the Middle East, with a capitalisation of 10 trillion riyals (US$2.6 trillion).

An ETF is an investment ­vehicle that works like a combination of mutual funds and stocks, allowing individual and institutional investors to trade these instruments in an easy and ­convenient way.

Saudi Arabia's Capital Market Authority said on September 17 that it had granted approval to local asset manager AlBilad Investment's request to offer "Albilad CSOP MSCI Hong Kong China Equity ETF" units on Tadawul. The regulator did not disclose the fund's launch schedule.

Leung said another ETF is also on the way, which would track a key benchmark in Hong Kong. She did not give more details.

Two sources told the Post that the second ETF would track the benchmark Hang Seng Index and involve Hang Seng Bank. Hang Seng Bank declined to comment.

SFC CEO Julia Leung and current and former chairmen of Hong Kong's market regulator attend an event on Thursday to mark the SFC's 35th anniversary. Photo: SFC alt=SFC CEO Julia Leung and current and former chairmen of Hong Kong's market regulator attend an event on Thursday to mark the SFC's 35th anniversary. Photo: SFC>

Links between Hong Kong and Saudi Arabia have been strengthening since the first Saudi ETF listed in the city last November. The CSOP Saudi Arabia ETF, the first in Asia to track the Middle East's biggest companies, including Saudi Aramco, has risen 5 per cent since its launch.