RIYADH: Investors will have the option to trade constituent stocks of the Saudi stock market directly on the Hong Kong Stock Exchange through exchange-traded funds in either Hong Kong dollars or Chinese renminbi.
This announcement comes as Asia's first Saudi ETFs are set to be listed on the HKEX on Nov. 29, according to a top official.
An ETF is an investment system that functions like a combination of mutual funds and stocks, enabling individual investors to conveniently invest in markets.
In his blog post, Paul Chan, the financial secretary of the Hong Kong Government, stated: “The asset size of this ETF is the largest of its kind in the world, and it can be said to be a practical example of the financial connectivity of the Belt and Road Initiative.”
He added: “I look forward to more two-way co-operation on financial products between the two places in the future, so as to make financial connectivity and capital flow wider and broader.”
Individual investors can buy and sell listed ETFs on stock markets, as they are similar to mutual funds in that they track entire indices.
Chan further mentioned that in the past two months, the HKEX has included the Saudi Exchange and the Indonesia Stock Exchange in the list of recognized bourses.
“The Saudi Exchange brings together the largest energy, industrial and medical sectors in the Middle East; the Indonesia Stock Exchange, on the other hand, is a fundraising destination for high-quality innovative companies in Southeast Asia,” added Chan.
In February 2023, both exchanges signed a memorandum of understanding to collaborate in sectors such as fintech and environmental, social, and governance, exploring listing opportunities.
Meanwhile, economic relationships between Saudi Arabia and China are also on the rise, with the central banks of both nations signing a local currency swap agreement worth SR26 billion on Nov. 20.
In a press statement, the Saudi Central Bank, also known as SAMA, said that the three-year agreement has been established in the context of financial cooperation between the central banks of both countries.
