Two Saudi-focused exchange-traded funds launched today in Shanghai and Shenzhen will give Chinese investors the option to bet on stocks in the oil-rich country for the first time as the two countries seek to strengthen ties.
The China Southern Asset Management CSOP Saudi Arabia ETF QDII listed in Shenzhen after raising 634 million yuan ($87 million), while the second fund, Huatai-PineBridge CSOP Saudi Arabia ETF QDII, started trading in Shanghai after raising 590 million yuan ($82 million).
The funds will make it easier for mainland investors to diversify their holdings internationally, especially in a region with influence in the energy sector. The debut of the funds comes as Beijing strengthens ties with Gulf states amid tensions with the West, and as Saudi investors increase their presence in Asia.
Facilitate joint listing
Mao Wei, chief investment officer of equity at China Southern Asset Management, explained that the targeted investors are those who have knowledge of equity markets, have a demand for global asset allocation, and have confidence 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 Hong Kong-based CSOP Saudi Arabia ETF, which debuted in the Asian financial hub last year after raising more than $1 billion. Saudi Arabia’s Public Investment Fund was a major investor in the fund, which tracks the FTSE Saudi Arabia Index.
The Saudi-China ETF program aims to facilitate the co-listing of funds in both countries, or the launch of feeder funds that invest in other funds.
Deepening Saudi-Chinese ties
Mainland Chinese investors will find it easier to build long and short positions on Saudi stocks with the two new funds, as they can invest in yuan and find information in Chinese, said Melody Xian He, executive vice president at CSOP Management.
About 20,000 individuals and funds received allocations into the ETFs during a seven-day offering period, she said in an interview.
As investment ties between China and Saudi Arabia deepen, Hong Kong could be the biggest beneficiary of a Saudi-Chinese ETF link, as ETFs listed on the two countries’ exchanges could feed into Hong Kong ETFs, said Rebecca Sen, an analyst at Bloomberg Intelligence in Hong Kong.
She noted that the next step for the Saudi-China ETF could be for Saudi asset managers to launch a feeder fund.
