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Hang Seng Investment Management has gained approval to launch a Hong Kong-focused exchange traded fund in Saudi Arabia, becoming the second manager to get the green light as authorities push for closer ties between the two markets.
Saudi Arabia’s Capital Market Authority said it had approved the launch of the SAB Invest Hang Seng Hong Kong ETF, which is managed by Hang Seng Bank’s investment arm and SAB Invest, a subsidiary of Saudi Awwal Bank, on the local stock exchange.
The new ETF will track Hong Kong’s flagship Hang Seng index but will feature an adjusted stock selection to align with sharia investment rules.
The listing date of the ETF has yet to be confirmed, but it is believed that it will follow the Albilad CSOP MSCI Hong Kong China Equity ETF, the first Hong Kong-focused ETF approved by the local regulator.
The Albilad CSOP MSCI Hong Kong China Equity ETF had already raised HK$10bn (US$1.3bn) by October 22, more than a week before its scheduled launch. A person familiar with the matter said the money had come from local Saudi investors. It listed on the stock exchange on Wednesday.
The Albilad CSOP MSCI Hong Kong China Equity ETF will tap the biggest Chinese companies by following the performance of the MSCI Hong Kong China Connect Select index and will also abide by sharia investment guidelines.
Paul Chan, Hong Kong’s financial secretary, told the Bund Summit in Shanghai in September that the government was expecting “some reciprocal moves” to take place this year, which would include the listing of a pair of Hong Kong-focused ETFs on the Saudi Exchange.
The new ETFs are the latest step in Hong Kong’s efforts to build closer links with wealthy investors in Middle Eastern markets.
In his third annual policy address last week, Hong Kong chief executive John Lee spelled out the government’s priorities for the next 12 months, which included collaborating with sovereign wealth funds from the Middle East to set up funds in the territory.
This year, Hong Kong’s Securities and Futures Commission also called on local asset managers to take advantage of emerging opportunities in the Middle East.
“Hong Kong as a superconnector or intermediator is not only serving mainland capital,” said Christina Choi, executive director in the SFC’s investment products division. “Traditionally we are serving a lot of international investors, and diversifying or having market access to other markets would be important.”
In November last year, CSOP Asset Management also launched the first ETF investing solely in Saudi Arabia’s equities market to be listed on the Hong Kong exchange, attracting $1bn in initial investment primarily from institutional investors.
The CSOP Saudi Arabia ETF, which was also the first such ETF with single-country exposure to the Saudi market listed in the Asia-Pacific region, has since amassed close to $1.3bn.
In July, CSOP Asset Management listed in Hong Kong the first and only sharia-compliant ETF in greater China, the CSOP MSCI HK China Connect Select ETF.
*Ignites Asia is a news service published by FT Specialist for professionals working in the asset management industry. Trials and subscriptions are available at ignitesasia.com.
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