On December 13, Huatai-PB Fund Management filed to launch the Huatai-PB Southern Dongying Saudi Arabia Exchange-Traded Fund (QDII), marking a significant step as the first publicly offered investment product from mainland China directly targeting the Saudi market. This initiative reflects the growing interest among Chinese investors in diversifying their portfolios by tapping into foreign markets, particularly one as pivotal as Saudi Arabia, which is renowned for its vast oil reserves and burgeoning economic potential.

Just a fortnight prior, the Southern Dongying Saudi Arabia ETF made its historic debut on the Hong Kong Stock Exchange. As the first ETF in the Asia-Pacific region to track the performance of Saudi stocks, it provides global investors an exceptional gateway to engage with the capital markets of Saudi Arabia. The launch of this ETF has piqued the interest of many potential investors, paving the way for the subsequent submission of Huatai-PB’s filing, thus bringing the offer of a domestic publicly traded product within reach.

Saudi Arabia, being the world’s largest oil exporter, has attracted a multitude of investors due to the stability and growth prospects of its market. The increasing relationship between China and international financial markets is indicated by the gradual integration initiated through these ETFs. This dynamic not only enhances the diversification options for investors but also opens avenues for potential returns from one of the fastest-growing economies globally.

The concept of cross-listing ETFs targeting the Saudi capital market is gaining traction, representing a strategic innovation within investment approaches.

The application submitted on December 13 by Huatai-PB Fund Management signifies the imminent arrival of the first Shanghai-Hong Kong cross-listed ETF focused on Saudi Arabia, marking a new era of investment accessibility.

On November 29, the Hong Kong Stock Exchange welcomed the historical listing of the Southern Dongying Saudi Arabia ETF. This product is now the first within the Asia-Pacific region dedicated to tracking the Saudi stock market. It consolidates significant stocks from the Saudi financial landscape, facilitating investments from Hong Kong using either HKD or RMB, hence opening the channel for direct investments into the Saudi capital market.

The Southern Dongying Saudi Arabia ETF boasts a diversified industry portfolio, covering critical sectors within the Saudi financial ecosystem such as energy, finance, and telecommunications, all of which hold substantial sway over the local economy. Prominent holdings include world-renowned entities such as Saudi Aramco, an oil giant, alongside major banking institutions like Al Rajhi Bank, National Commercial Bank, Riyad Bank, and the Saudi British Bank, all of which significantly contribute to the ETF’s investment valuation. This diverse selection allows investors a comprehensive exposure to the growth trajectories of the Saudi capital market.

Saudi Arabia ranks among the fastest-growing economies worldwide; having been listed as the 17th largest economy globally, it achieved a nominal GDP exceeding $1 trillion in 2022, marking a historical high. The country’s real GDP growth index witnessed an 8.7% year-on-year increase, outpacing other mid-eastern economies and G20 member nations. The Saudi Stock Exchange stands as the 11th largest globally and the 3rd largest among emerging markets, signaling a robust economic environment ripe for investment.

The Huatai-PB Southern Dongying Saudi Arabia (QDII-ETF) will adopt a linking investment strategy that enables investors to closely track the performance of the FTSE Saudi Arabia Index. This strategic approach signifies that the product provides direct engagement with the Saudi capital market while minimizing cross-market trading complexities and associated costs, thereby improving the investment process’s efficiency and convenience.

Market experts highlight that the merits of this cross-listing investment method reside in its efficiency and flexibility. Firstly, it offers investors direct access to targeted markets, thereby reducing complexities and costs related to cross-border transactions. Furthermore, it enhances liquidity since the ETFs themselves can serve as instant liquidity sources. Additionally, cross-listed ETFs permit fund managers a more straightforward application of overseas investment quotas, mitigating inconveniences posed by trading day discrepancies and time zone differences. These advantages make such instruments an attractive option for investors aiming for diversified exposure in global capital markets.

Cross-border products furnish diversified investment opportunities.

The ETF market has seen accelerated growth this year, showcasing an evolution in product forms. In tune with the global capital markets' progressive opening up, coupled with the burgeoning demand from international investors for diversification, cross-border ETFs have emerged as vital instruments bridging various economies and market landscapes.

Industry insiders affirm that cross-border ETFs encompass key global capital markets, enabling investors seamless access to deploy their assets globally, thereby simplifying diversification efforts while mitigating reliance on singular market risk. Notably, compared to other investment instruments, cross-border ETFs frequently come with lower management fees and trading costs, positioning them as cost-effective investment options. Additionally, they boast T+0 trading, enhancing liquidity and usage efficiency of funds.

For instance, the launch of the Southern Dongying Saudi Arabia ETF not only provides investors with a pathway into the Middle Eastern capital market but also symbolizes a new direction in global asset allocation strategies. This paves the way for a future with more similar products on the market, offering investors a broader span of choices. According to exchange data, by November 28, the total issuance of cross-border ETFs increased by 151.24 billion shares this year alone, representing an impressive growth rate of 58%, illustrating the investment fervor directed towards cross-border ETFs.

An industry professional in Shanghai shared with reporters that the evolution of cross-border ETFs has undergone a transformative journey. Taking the US-listed Chinese internet ETF as a case in point, despite its initial lukewarm acceptance, market recognition has steadily climbed, with substantial growth in product scale emerging over time. Observing current trends, it appears that cross-border ETFs are cementing their position as essential tools for global investors aiming for diversified and international investment portfolios.