Hong Kong and Saudi Arabia Developing ETF to Boost Economic Ties

Hong Kong and Saudi Arabia’s Tadawul have joined hands to create more financial products such as Exchange Traded Funds (ETF) to facilitate investors park their money in each other’s capital markets.

Addressing the Capital Markets Forum, organised by the Hong Kong and Saudi stock exchanges in Hong Kong on Thursday, Hong Kong’s Deputy Financial Secretary Michael Wong Wai-lun said that the proposed ETF will track Hong Kong’s benchmark stock index.

The ETF will be listed for trading on the Saudi Arabia’s main exchange Tadawul in Riyadh, to enable the investors from the Middle East to the latest developments in China and Hong Kong and also to further strengthen two-way capital flows.

“Hong Kong provides an excellent financing platform for Saudi Arabian companies, which can help them obtain international capital for expanding their business.,” Wong said in a statement at the Forum.

HKEX has added the Saudi Exchange to its list of recognised stock exchanges in 2023, and enterprises listed on the Saudi Exchange can apply for a secondary listing in Hong Kong, Wong said.

According to him, Hong Kong was reaffirming its commitment to Saudi Arabia with a series of initiatives aimed at strengthening ties. Cathay Pacific Airways is expected to relaunch direct passenger flights from Hong Kong to Riyadh in the fourth quarter of this year, with flight time to be cut to six hours. Hong Kong is also considering the establishment of an economic and trade office in Riyadh.

“The friendship and partnership between Hong Kong and Saudi Arabia will go very far and will endure the test of time,” Wong said.

“Saudi Arabia has set clear and ambitious goals for the development of its financial markets, and its cultivating a diversified and efficient financial sector that contributes to realising the objectives of Saudi Vision 2030,” he said.

Ties with Middle East

Hong Kong continues to make efforts to create financial linkages with the Middle East. In January, the Hong Kong Monetary Authority signed a memorandum of understanding (MOU) with Saudi Arabia’s Financial Sector Development Program to enhance connectivity between markets. 

Outside of Saudi Arabia, Hong Kong also recently signed an MOU with Qatar for collaborative efforts in their respective financial sectors.

According to South China Morning Post, the new financial product underscores the flurry of collaborations and accords between Hong Kong and Riyadh since the February 2023 visit by Chief Executive John Lee Ka-chiu to the Kingdom.

Hot on the heels of that visit, HKEX and Tadawul agreed to work together in fintech, cross listings and disclosure standards for the environment, sustainability and governance (ESG). Hong Kong’s Monetary Authority has an accord to work with the Saudi Central Bank.