Financial Secretary Paul Chan Mo-po (third right), Deputy Governor of Saudi Arabia’s Public Investment Fund Yazeed Alhumied (fourth left); Chief Executive Officer of CSOP Asset Management Ding Chen (fourth right); Chief Executive Officer of the Hong Kong Exchanges and Clearing Nicolas Aguzin (second right); Chairman of the Securities and Futures Commission Tim Lui (first right), and other guests officiate at the gong-striking ceremony for CSOP Saudi Arabia ETF listing in Hong Kong on Nov 29, 2023. (PHOTO / HKSAR GOVERNMENT)

Asia’s first and the world’s largest Saudi Arabia-focused exchange-traded fund went public on the Hong Kong Stock Exchange on Wednesday, fortifying the city’s roles as a superconnector and gateway for global capital flows, and strengthening the global connectivity of its ETF market.

CSOP Saudi Arabia ETF, with dual trading counters in Hong Kong dollars and renminbi, tracks the FTSE Saudi Arabia Index, with exposure to 56 large and mid-cap companies listed on Saudi Arabia’s stock exchange, covering sectors like financials, basic materials, energy, and telecommunications.

CSOP Saudi Arabia is a physical ETF that invests up to 100 percent of its net asset value in a representative portfolio of securities that collectively has a high correlation to the FTSE Saudi Arabia Index.

As a superconnector and crucial gateway for capital flows, Hong Kong is, undoubtedly, best positioned to connect Saudi Arabia’s boundless investment opportunities and investors in Asia and beyond.

Paul Chan Mo-po, Financial Secretary

“As a superconnector and crucial gateway for capital flows, Hong Kong is, undoubtedly, best positioned to connect Saudi Arabia’s boundless investment opportunities and investors in Asia and beyond,” Financial Secretary Paul Chan Mo-po said at the listing ceremony.

Through various financial market connectivity programs with the Chinese mainland, the SAR facilitates mainland capital in accessing the world market, and vice versa for international capital, he said.

“Since Hong Kong launched its stock connect programs with Shanghai and Shenzhen in 2014, the mainland’s outbound investments through the programs have exceeded $360 billion, with a cumulative turnover of over $4,700 billion. Seventy percent of the A-shares held by international investors were acquired via the stock connect programs.”

Chan said Hong Kong now boasts having 175 ETFs with a total market capitalization of about $50 billion, with average daily turnover reaching $1.5 billion in the first 10 months of this year -- up more than 25 percent from last year’s.

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Financial Secretary Paul Chan Mo-po speaks at the  CSOP Saudi Arabia ETF listing ceremony in Hong Kong on Nov 29, 2023. (PHOTO / HKSAR GOVERNMENT)

“We seek to connect this capital market hub (Hong Kong) with Saudi Arabia. Saudi Arabia is attractive to Asian investors not only because it is a major and growing market, but also because its strategic location links up Asia, Europe and Africa,” said Yazeed Alhumied, deputy governor of Saudi Arabia’s Public Investment Fund - the sovereign wealth fund of Saudi Arabia which is the anchor investor of CSOP Saudi Arabia ETF.

We seek to connect this capital market hub (Hong Kong) with Saudi Arabia. Saudi Arabia is attractive to Asian investors not only because it is a major and growing market, but also because its strategic location links up Asia, Europe and Africa

Yazeed Alhumied, deputy governor of Saudi Arabia’s Public Investment Fund

He said the listing will unlock unprecedented opportunities between the key capital markets hub of Hong Kong and the Saudi equity market that has attracted global capital inflows recently. 

“The HKEX is committed to bringing some of the most exciting opportunities to our markets, while linking up Saudi Arabia with the vast opportunities of China and the wider Asian region. The listing of the CSOP Saudi Arabia ETF enriches the diversity of the HKEX product offering, adding to a rapidly growing ETF segment," said Nicolas Aguzin, chief executive officer of Hong Kong Exchanges and Clearing, which runs the city’s bourse.

Julia Leung, chief executive officer of the Securities and Futures Commission, said since the launch of ETF Connect last year, the average daily turnover of southbound trading has jumped multiple times. “What is more is that the Stock Exchange of Hong Kong has recognized the Saudi Arabia Exchange, enabling Saudi companies to apply for secondary listings here (Hong Kong),” she said.

“As a vital region of the Belt and Road Initiative, the ETF listing has ushered in a new chapter of long-term financial cooperation between the two markets. It further cements Hong Kong’s strategic role as an important conduit between the Chinese mainland and the Middle East, lifting Hong Kong’s capital market appeal to Middle Eastern corporations and investors,” KPMG China Capital Markets Partner Louis Lau said.

With an initial investment of over $1 billion, CSOP Saudi Arabia ETF is the world’s largest Saudi Arabia-focused ETF. The ETF has a listing price at about HK$78 ($10) per share, a trading lot size of 10 units and an annual management fee of 0.99 percent.

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Hong Kong investors can build up their exposure to the Saudi equity market through CSOP Saudi Arabia’s listing, while mainland investors can do so in southbound trading under the ETF Connect.

According to CSOP Asset Management, the FTSE Saudi Arabia Index has achieved a return of 45.3 percent in the past three years.