(Bloomberg) — Two exchange-traded funds tracking shares in Hong Kong and China are debuting in Saudi Arabia this week, as investments and financial links between the Asian city and the oil-rich kingdom grow.
The Albilad CSOP MSCI Hong Kong China Equity ETF, which raised HK$10 billion ($1.3 billion), ended its first session on Wednesday at 9.97 riyals, down from a listing price of 10 riyals. The fund is larger than any other ETF already listed on the Saudi exchange. On Thursday, the SAB Invest Hang Seng Hong Kong ETF will launch there, also with a listing price of 10 riyals.
The debuts happen as the kingdom hosts the eighth edition of its Future Investment Initiative, a Davos-style confab that lured top executives from Wall Street and Silicon Valley to the kingdom. The head of Hong Kong Exchanges and Clearing Ltd., Bonnie Chan, and the city’s financial secretary Paul Chan are among guests to the event as the Gulf has become a key region for investments over recent years.
The ETFs in Riyadh will provide easier access in local currency to investors seeking exposure to Chinese stocks. About one year ago, a $1 billion ETF tracking Saudi shares listed in Hong Kong, the largest of its type to trade in the city.
“Saudi and Hong Kong ETFs are doing a $1 billion asset swap in each other’s funds in an effort to stimulate their home markets and make the ETFs more attractive to outside investors,” Bloomberg Intelligence analysts Eric Balchunas and Rebecca Sin wrote in a report. “One of the big motivations to do this swap is that both markets are looking to increase their flows and liquidity.”
The Albilad CSOP ETF will invest in Chinese equities through the Hong Kong-domiciled CSOP MSCI HK China Connect Select ETF, which counts e-commerce firm Meituan and sportswear maker Anta Sports Products Ltd. among its biggest holdings.
The listing of Hong Kong exchange-traded funds on the Saudi exchange was a “reciprocation” to the two Saudi ETFs listed in Hong Kong earlier after building awareness of both markets, HKEX’s Chan said in an interview to Bloomberg TV on Wednesday. The bourse also said on Wednesday it plans to open an office in Riyadh next year.
–With assistance from Jack Wang and Kiuyan Wong.
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