ETF tracking HK stocks in the works for Riyadh

Hong Kong and Saudi Arabia are working on an exchange-traded fund tracking Hong Kong stock indices to list in Riyadh, as the Middle East country admitted the existing financial engagement related to China is inadequate.

Hong Kong’s Deputy Financial Secretary Michael Wong Wai-lun revealed the ETF project at the Capital Markets Forum Hong Kong co-organized by Saudi Tadawul Group and Hong Kong Exchanges and Clearing (0388).

The city is working with several financial institutions to list the ETF in the Middle East to promote two-way capital flows and the Hong Kong government is also considering setting up an economic and trade office in Riyadh.

The new possible ETF came after Hong Kong launched an ETF in November last year that tracks the performance of the FTSE Saudi Arabia Index to gain exposure to the Saudi market.

The CSOP Saudi Arabia ETF (2830), the first exchange-traded fund of its kind in Asia, debuted with more than US$1 billion (HK$7.8 billion) in assets and the backing of Saudi Arabia’s sovereign wealth fund.

Even so, it only attracted around US$12 million in funds from its inception through April 24, according to calculations from Bloomberg Intelligence. CSOP Asset Management, which manages that fund, aims to cross-list it to Shanghai in the second half of the year.

The appeal of closer ties with China is clear from the Saudi Arabian side too. Saudi Arabia’s deputy minister of investment transactions Saleh Al-Khabti said at the event that Hong Kong can bring opportunities for Saudi as a bridge to the mainland market. He added that the financial sector still has much to be done to boost connectivity between Saudi and China as well as other Asian regions.

At the same event, HKEX chief executive Bonnie Chan Yi-ting believes the Saudi companies would come to list in Hong Kong soon.

Chan added that HKEX has now about 100 listing applications, and big-ticket initial public offerings are anticipated to come back.

The city has been facing a listing drought. Just 12 companies raised HK$4.8 billion from IPOs in Hong Kong in the first quarter, down 28 percent from a year earlier. The biggest debut in 2024, Chinese bubble-tea maker Sichuan Baicha Baidao Industrial (2555), plunged 27 percent on its first day of trading.

Also yesterday, the Securities and Futures Commission’s executive director of investment products Christina Choi Fung-yee said the SFC will make its first visit to the Gulf region from late May to early June led by chief executive Julia Leung Fung-yee.