ETFs tracking Saudi stocks soar after listing on Chinese bourses

The funds rose by 10 per cent to reach the daily limit amid growing appetite from investors in China

People walk on a pedestrian bridge with a screen showing stock exchange data in Shanghai. Saudi Arabia and China continue to strengthen economic ties. EPA

Two exchange-traded funds that track Saudi Arabian stocks extended their gains on Wednesday after debuting a day earlier on Chinese mainland bourses amid the deepening of economic ties between the two nations.

The ETFs, managed by Huatai-PineBridge Investments and Southern Asset Management rose by the daily limit of 10 per cent during the morning trading session, following a 10 per cent increase on Tuesday, Chinese state news agency Xinhua reported on Wednesday.

Huatai-PineBridge Investments is listed on the Shanghai stock market, while Southern Asset Management is listed on the Shenzen bourse.

Both funds, tracking the FTSE Saudi Arabia Index which covers over 50 medium and large-sized firms, offer Chinese investors an option to broaden their investment portfolio by trading equities in the kingdom.

The two funds raised a total of 1.22 billion yuan ($171.06 million).

The target investors for the ETFs are “those who have knowledge in equity markets, have demand for global asset allocation and have confidence in the energy sector”, Bloomberg quoted Mao Wei, the chief equity investment officer at China Southern Asset Management as saying.

“People will pay more attention to Saudi Arabia looking at the energy and financial sector” compared with US or Japanese investment options, he added.

The latest development comes as Saudi Arabia and China, the world’s second-largest economy, continued to strengthen economic ties.

Last year, the two countries signed agreements worth more than $25 billion at an investment conference in Beijing covering sectors such as energy, agriculture, tourism, mining, financial services, logistics, infrastructure, technology and healthcare.

The Shanghai and Shenzhen bourses also signed agreements with Saudi Tadawul Group to enhance capital market links and explore potential co-operation opportunities in cross-listing, FinTech, data exchange and research, among other areas, according to Xinhua.

In November, Asia's first ETF tracking shares listed in Saudi Arabia was launched in Hong Kong, enhancing the financial hub's co-operation with the kingdom.

China has been boosting ties with regional partners in recent months. In May, it signed several new economic deals to strengthen ties with the UAE, the Arab world’s second-largest economy, during President Sheikh Mohamed's visit to Beijing.