Saudi Arabia's first exchange-traded funds (ETFs) that track Hong Kong-listed shares, mainly Chinese firms, are expected to be the largest such funds in the Middle East.
Trading of the product, which kicks off on Wednesday on the Saudi Stock Exchange, has raised more than $1.2 billion at the start, issuer Albilad Capital and its partner Hong Kong's CSOP Asset Management said.
The initial size will surpass the current largest Islamic ETF - Al Rayan Qatar ETF - listed on the Qatar Exchange, LSEG data shows.
As ties grow between Arab countries and Beijing and Hong Kong, the ETFs open doors for Middle East investors to gain easy access to capital markets in the world's second largest economy.
The Albilad CSOP MSCI Hong Kong China Equity ETF is sharia-compliant, CSOP said, adding that it invests in 30 stocks through a Hong Kong-listed ETF tracking the MSCI HK China Connect Select Index (3432.HK), opens new tab.
The top three holdings are delivery platform Meituan (3690.HK), opens new tab, power tools maker Techtronic Industries (0669.HK), opens new tab and sportswear maker Anta Sports (2020.HK), opens new tab.
The product "opens a new avenue for investors to engage with the dynamic growth of China through Hong Kong, all while adhering to Sharia principles," said Zaid AlMufarih, the chief executive of Albilad Capital.
Another ETF that tracks Hong Kong stocks, SAB Invest Hang Seng Hong Kong ETF, will be launched on Thursday by SAB Invest, an arm of Saudi Awwal Bank.
"At a time when Chinese markets have underperformed in recent years, this launch signals potential for value, particularly for investors in the MENA region, who are prepared to look past geopolitical friction," said Gary Dugan, chief executive of the Global CIO Office, based in Dubai.
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