Saudi Arabia’s new $1.2B ETF in China : What’s the big deal ?

On Tuesday, October 29, 2024, Saudi Arabia took a major strategic step by launching the largest ETF in the Middle East, backed by Chinese stocks listed in Hong Kong. Indeed, this exchange-traded fund, named Albilad CSOP MSCI Hong Kong China Equity ETF, goes beyond a simple financial operation; it is part of a long-term vision aimed at strengthening the relationships between these two economic powers. In the face of volatility in Chinese markets and global economic uncertainties, this launch is a clear indicator of Saudi ambitions to diversify their partnerships and increase their influence on the international financial scene.

Saudi Arabia strengthens its economic ties with China

The launch of the Albilad CSOP MSCI Hong Kong China Equity ETF by Saudi Arabia marks a significant change in the economic relations between the Middle East and Asia. With over $1.2 billion in capital, this sharia-compliant fund offers Saudi and regional investors direct exposure to Chinese stocks listed in Hong Kong. “The fund invests in 30 leading Chinese companies, including Meituan and Techtronic Industries,” stated the ETF managers, Albilad Capital and CSOP Asset Management. This demonstrates a commitment to invest in strategic sectors for the Chinese economy, despite current market turbulence.

This initiative comes after months of volatility in Chinese markets, exacerbated by global economic concerns. However, the MSCI HK China Connect Select Index, on which the ETF is based, rebounded by 12% in the first nine months of the year, indicating a renewed confidence. For Saudi Arabia, this fund represents much more than a simple investment. It embodies a clear intention to participate in the Chinese economic recovery, with a view to diversifying the financial opportunities available to Gulf investors.

A Strategic Step Towards Increased Intercontinental Cooperation

The significance of this new fund goes beyond immediate financial opportunities. It aims to strengthen intercontinental relations between Saudi Arabia and China. This is not the first time these two economic powers have collaborated on financial initiatives. Indeed, Hong Kong had previously launched the first Asian ETF based on Saudi stocks, which illustrates a growing trend towards bilateral capital exchanges. This new step reflects a deeper strategic partnership.

The launch of this ETF paves the way for future collaborations between the financial markets of the Middle East and Asia, with prospects for extension into other economic sectors. Indeed, the creation of other similar financial instruments, like the SAB Invest Hang Seng Hong Kong ETF, is already in preparation and could further consolidate these alliances. Saudi Arabia thus positions itself as a bridge between East and West, enabling the diversification of global investment flows and redefining traditional economic partnerships.

With the launch of this new ETF, Saudi Arabia confirms its intention to be a key player in the interconnectedness of Asian and Gulf financial markets. This fund represents a genuine growth lever for investors in the Middle East and strengthens economic ties with China. Ultimately, this initiative, which serves as an example of bilateral relations within BRICS, could enhance cooperation between these two regions while transforming international investment dynamics by encouraging greater openness and diversification of portfolios for institutional and private investors worldwide.