China allows listing of 2 ETFs tracking top Saudi companies on domestic markets

China has opened its capital market to Asia’s first exchange-traded fund (ETF) that tracks Saudi Arabia’s biggest companies, as the two countries continue to deepen financial ties.

Two feeder funds – Hautai-Pinebridge CSOP Saudi Arabia ETF QDII and China Southern CSOP Saudi Arabia ETF QDII – which mirror the CSOP Saudi ETF in Hong Kong have received approval from the China Securities Regulatory Commission to be listed on the continent, the two companies said. Friday. The funds will be managed by Huatai-Pinebridge Fund Management and China Southern Asset Management.

The cross-listed ETFs will operate under the Qualified Domestic Institutional Investor (QDII) program, which allows institutional investors to invest in foreign securities within a prescribed quota. Funds offered under the QDII program officially allow Chinese retail investors to invest in foreign stocks and bonds.

“This is the first of its kind for mainland investors,” said Ding Chen, CEO of CSOP Asset Management, a Hong Kong firm owned by China Southern Asset Management. The market has shown great interest in the product and also supports the Belt and Road Initiative, she added.

CSOP Asset Management has received approval from China’s market regulator to launch an ETF tracking Saudi stocks. Photo: CSOPCSOP Saudi ETF listed last November in Hong Kong. The ETF tracks the FTSE Saudi Arabia Index, which had a market capitalization of $303.5 billion at the end of May. Al Rajhi Banking, Saudi Aramco, Saudi National Bank, Saudi Aramco, ACWA Power and Saudi Basic Industries are the top five constituents, accounting for 43 percent of the index weight. The cross-listing of the ETF could help the fund tap China’s 200 million individuals. investors, which showed growing appetite for foreign ETFs. With a weak domestic stock market and a slowdown in the real estate sector, investors are looking to diversify their holdings.

The CSI 300 index, which tracks the largest companies listed in Shanghai and Shenzhen, has gained 3.2 percent so far this year after falling for three straight years. Meanwhile, the S&P 500 index in the United States and the Nikkei 225 index jumped 13.9 and 16 percent respectively, recording new highs along the way.

At the same time, the FTSE Saudi index has lost 5.9 percent this year in US dollar terms, according to Bloomberg data.

The launch of the ETFs comes as China and Saudi Arabia continue to strengthen financial collaboration and create more products, allowing investors to tap into each other’s financial markets.

The Shanghai Stock Exchange last September signed an agreement with Saudi Tadawul Group, the local stock exchange operator, to collaborate on cross-listings, fintech, ESG (environmental, social and governance) and data exchange.

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