Two exchange-traded funds (ETFs) focusing on Saudi stocks were launched today, Tuesday, in Shanghai and Shenzhen, offering Chinese investors the opportunity to invest in the oil-rich nation for the first time amid ongoing efforts to strengthen bilateral relations. The "China Southern Asset Management CSOP Saudi Arabia ETF QDII" was listed in Shenzhen after raising 634 million yuan (87 million USD), while the second fund, the "Huatai-PineBridge CSOP Saudi Arabia ETF QDII," began trading in Shanghai after raising 590 million yuan (82 million USD). These funds will make it easier for mainland investors to diversify their holdings internationally, particularly in a region that holds significant influence in the energy sector.
The debut of these funds comes at a time when Beijing is enhancing its relationships with Gulf countries amid tensions with the West, as Saudi investors also increase their presence in Asia. Mao Yi, Chief Investment Officer in Equities at China Southern Asset Management, explained that the target investors are "those knowledgeable about stock markets, seeking to allocate their investments to global assets, and confident in the energy sector." He added that "investors are paying more attention to Saudi Arabia, especially those interested in the energy and financial sectors, compared to investment options in the United States and Japan."
The ETFs will invest indirectly in the Saudi market through the "CSOP Saudi Arabia" ETF listed in Hong Kong, which was first launched in the Asian financial hub last year after raising over one billion dollars. The Saudi Public Investment Fund was one of the major investors in this fund, which tracks the Saudi FTSE index.
**New Cooperation Agreements**
On Wednesday, Saudi Arabia and China signed more than 60 memoranda of understanding and agreements worth over 25 billion dollars, marking a new step in the growing partnership between the two countries. The Saudi-Chinese ETF program aims to facilitate the joint listing of funds in both countries or to launch "feeder" funds that invest in other funds.
**Deepening Ties**
Investors in mainland China will find it easier to build buy and sell positions on Saudi stocks using the new ETFs, as they can invest in yuan and find information in Chinese, according to Melody Xian, Chief Executive Vice President at CSOP Management. She stated in an interview that around 20,000 individuals and funds received allocations in the ETFs during a seven-day offering period.
As investment ties between China and Saudi Arabia deepen, Hong Kong could be "the biggest beneficiary of the Saudi-Chinese ETF linkage program, as ETFs listed on both countries' stock exchanges could feed into ETFs in Hong Kong," according to Rebecca Sin, an analyst at Bloomberg Intelligence in Hong Kong. She noted that "the next step for the Saudi-Chinese ETF might be for Saudi asset managers to launch a feeder fund."
