By Middle Eastern traders will soon be able to invest in Hong Kong stocks via two exchange-traded funds (ETFs) tracking benchmarks in the city once they are listed on the Saudi stock exchange at the end of this month.
Financial Secretary Paul Chan Mo-po will lead a delegation comprising scores of local regulators and financiers to the FII conference in Riyadh and to mark the launch of the ETFs, according to Julia Leung Fung-yee, CEO of the Securities and Futures Commission (SFC).
“The two ETFs tracking Hong Kong stocks to be listed in the Saudi Stock Exchange will mark an important milestone in the linkage between the capital markets of Hong Kong and Saudi Arabia,” Leung said in an interview on Friday.
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She visited Saudi Arabia in June to meet officials and discuss the potential listing of ETFs on each other’s exchanges. Saudi Exchange, or Tadawul, is the largest market in the Middle East, with a capitalisation of 10 trillion riyals (US$2.6 trillion).
An ETF is an investment vehicle that works like a combination of mutual funds and stocks, allowing individual and institutional investors to trade these instruments in an easy and convenient way.
Saudi Arabia’s Capital Market Authority said on September 17 that it had granted approval to local asset manager AlBilad Investment’s request to offer “Albilad CSOP MSCI Hong Kong China Equity ETF” units on Tadawul. The regulator did not disclose the fund’s launch schedule.
Leung said another ETF is also on the way, which would track a key benchmark in Hong Kong. She did not give more details.
Two sources told the Post that the second ETF would track the benchmark Hang Seng Index and involve Hang Seng Bank. Hang Seng Bank declined to comment.
SFC CEO Julia Leung and current and former chairmen of Hong Kong’s market regulator attend an event on Thursday to mark the SFC’s 35th anniversary. Photo: SFC alt=SFC CEO Julia Leung and current and former chairmen of Hong Kong’s market regulator attend an event on Thursday to mark the SFC’s 35th anniversary. Photo: SFC>
Links between Hong Kong and Saudi Arabia have been strengthening since the first Saudi ETF listed in the city last November. The CSOP Saudi Arabia ETF, the first in Asia to track the Middle East’s biggest companies, including Saudi Aramco, has risen 5 per cent since its launch.
“While the SFC will continue to expand the many connect schemes with mainland China, the regulator will continue to work with other regulators in the Middle East and Southeast Asia to build more cross-border collaborations to strengthen Hong Kong’s role as an international financial centre,” Leung said.
The SFC will continue to promote fintech and regulations on virtual asset trading going forward, she added.
Last month, Hong Kong dethroned Singapore to become Asia’s top financial centre for the first time in two years, with a strong stock market and new listings giving the city a boost, according to the the semi-annual Global Financial Centres Index.
The SFC, which turned 35 in May, hosted a celebration on October 3 that brought together seven current and former chairmen – first head Robert Owen, Robert Nottle, Anthony Neoh, Andrew Sheng, Eddy Fong, Carlson Tong and the incumbent Tim Lui.
The commission was established in 1989, two years after the Black Monday stock market crash, as an independent regulator to ensure the quality of the market and intermediaries, including brokers and fund managers, and to enforce rules to protect investors.
In recent years, the SFC’s responsibility has grown. These include promoting the various connect schemes and regulating virtual assets, which Leung said will continue to be the focus in the coming years.
“A key mission of the SFC is to safeguard the interests of the investors and to maintain the quality of the Hong Kong stock market. This mission will continue,” she said.
Hong Kong’s stock market has come a long way since the SFC’s formation. The number of companies listed on the exchange has grown ninefold from 298 in 1989 to 2,611, while market capitalisation has jumped 30 times to HK$30 trillion (US$3.8 trillion).
The city has also been the world’s top initial public offering market seven times between 2009 and 2019, partly because of the SFC’s strict oversight that has significantly lifted the quality of the market.
Another important contribution of the SFC has been promoting the wealth management sector. The number of Hong Kong-domiciled funds has risen from 157 in 1989 to 926 currently, while the net asset value of all SFC-authorised funds has jumped 49 times to US$1.76 trillion during the same period, according to SFC data.
“Over the past 35 years, the SFC has led the markets to cope with major financial crises, including the 1998 Asian financial crisis and the 2008 global financial crisis,” Leung said.
“The market has ups and downs, but what is important is to maintain the trading and clearing systems to work smoothly during these volatile times.
“Times have changed, but the mission of the SFC has not. The SFC will continue to safeguard the interests of small investors and enhance Hong Kong’s status as an international financial centre.”
This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP’s Facebook and Twitter pages. Copyright © 2024 South China Morning Post Publishers Ltd. All rights reserved.
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