First Saudi ETF Launched on Hong Kong Stock Exchange

Saudi Arabia has launched its first Exchange Traded Fund (ETF) Premia BOCHK Saudi Arabia Government Sukuk ETF on Hong Kong Stock Exchange (HKEX).

The ETF is also Asia’s first Saudi Arabia Government Sukuk ETF and the first of its kind listed outside the Kingdom. The launch comes on the heels of Hong Kong seeking to boost connectivity with the Kingdom and the Middle East.

On May 29, Hong Kong’s Securities and Futures Commission’s (SFC) CEO Julia Leung met with CMA Board Commissioner Abdulaziz Bin Hassan in Hong Kong and they agreed to enhance regulatory collaboration and continue to work towards a Memorandum of Understanding (MOU) to facilitate cross-border investment initiatives between Hong Kong and Saudi Arabia.

They were also joined by the SFC’s Chairman Dr Kelvin Wong, Executive Director of Investment Products Ms Christina Choi as well as the CMA’s senior executives to witness the listing of the first ETF in Hong Kong.

Tracking the performance of the underlying Sukuk index, the SFC-authorised ETF is Asia’s first investment grade Sukuk ETF. A milestone in itself, its listing underscored Hong Kong’s commitment to deepening regional market ties as well as diversifying product offerings.

Leung said that strengthening collaboration with the Middle East is pivotal to Hong Kong’s efforts to expand its worldwide network of trusted partners amidst new global challenges.

“This enhanced linkage not only allows investors in both Hong Kong and Saudi Arabian markets to access each other’s assets, but also gives fresh impetus to the city’s role as a super-connector on the China-Middle East Corridor,” she added.

Convenient Access

According to Premia Partners, this pioneering ETF offers investors very convenient access through a one-ticker trade, to the Saudi Arabia government and government agencies sukuk denominated in Saudi Riyal or USD, with attractive yield, low correlation with major asset classes and with a competitive total expense ratio of 0.35% per annum.

The investment objective of the ETF is to provide investment results that, before fees and expenses, closely correspond to the performance of the iBoxx Tadawul Government & Agencies Sukuk Index (SAR Unhedged) TRI (Index).

In seeking to achieve the ETF’s investment objective, the Investment Adviser will primarily use an optimised representative sampling strategy by primarily investing directly in a representative sample of SAR denominated Sukuk securities issued by the Saudi government and USD denominated Saudi Exchange listed Sukuk securities issued by Saudi Arabia government and agencies issuers from the Index that collectively reflects the investment characteristics of the Index.

The ETF may, in exceptional circumstances, invest up to 20% of the ETF’s Net Asset Value in FDIs for hedging and non-hedging purposes. These include the use of instruments such as fully funded Swaps, such as total return swaps, to acquire exposure to the performance of the Index when liquidity in the market is low.

This launch not only strengthens market connectivity between Hong Kong and the Middle East but also unlocks access to Saudi Arabia’s dynamic growth potential and transformation with Vision 2030, Premia Partners said.

According to media reports, this is the latest of many Saudi and Chinese ETFs listed in Hong Kong, Shenzhen, Shanghai, and Riyadh since 2023. Bank Albilad rolled out the $1.2 billion CSOP MSCI Hong Kong China ETF last October, followed by the Sab Invest Hang Seng Hong Kong ETF.

Both launches came a month after the Kingdom’s Capital Market Authority (CMA) approved Saudi Arabia’s first Hong Kong-focused ETF for listing on Saudi Exchange (Tadawul), which was followed by Hong Kong’s decision to list a Saudi-focused ETF on the Hong Kong exchange in November 2023.