Chinese market welcomes two Saudi stock ETFs

Two exchange-traded funds (ETFs) focused on Saudi Arabian stocks debuted today in Shanghai and Shenzhen, providing Chinese investors with an opportunity to invest in the oil-rich nation’s equities as both countries strengthen their ties.

The China Southern Asset Management CSOP Saudi Arabia ETF QDII listed in Shenzhen, raising 634 million yuan ($87 million), while the Huatai-PineBridge CSOP Saudi Arabia ETF QDII began trading in Shanghai, raising 590 million yuan. As of 10:20 am local time, both funds traded close to their listing prices.

These ETFs will help mainland investors diversify their holdings internationally, especially in the influential energy and oil sectors. This launch coincides with Beijing’s efforts to strengthen ties with Gulf nations amid tensions with the West and increased Saudi investment in Asia.

Mao Wei, Chief Equity Investment Officer at China Southern Asset Management, noted that the target investors are those with knowledge of equity markets, a demand for global asset allocation, and confidence in the energy sector.

The ETFs will invest in the Saudi market via the Hong Kong-domiciled CSOP Saudi Arabia ETF, which debuted last year, raising over $1 billion and including Saudi Arabia’s sovereign wealth fund as a leading investor.

Melody Xian He, Deputy CEO at CSOP Asset Management, highlighted that mainland investors will find it easier to gain exposure to Saudi stocks using these funds, as they can invest in yuan and access information in Chinese.

Approximately 20,000 individuals and funds took allocations in the ETFs during a seven-day offer period.

Rebecca Sin, an analyst at Bloomberg Intelligence in Hong Kong, suggested that Hong Kong could be the largest beneficiary of the Saudi-China ETF Connect programme, with ETFs listed in Saudi Arabia and mainland China potentially feeding back into the Hong Kong ETF. The next step could involve Saudi Arabian asset managers launching a feeder fund.