Saudi Arabia is set to debut its first exchange-traded fund (ETF) tracking Hong Kong-listed equities, the Albilad CSOP MSCI Hong Kong China Equity ETF, marking a pivotal moment in the country's financial collaboration with China. Approved by the Saudi Capital Market Authority, this ETF, a joint venture between AlBilad Investment Co. and CSOP Asset Management, aims to offer Saudi investors a gateway to Hong Kong's vibrant stock market, particularly Chinese companies listed there. Although a launch date has not yet been confirmed, its listing on the Saudi Exchange is expected to break new ground for cross-regional financial cooperation.

The ETF is the first of its kind in Saudi Arabia to track Hong Kong stocks, signifying the growing interdependence between the Chinese and Saudi markets. This move comes on the heels of broader efforts to deepen economic ties between the two nations, particularly in the green economy, where sectors such as new-energy vehicles (NEVs) and photovoltaic products are prime areas for cooperation. The launch of this ETF represents a natural progression in this relationship, offering Saudi investors exposure to China's rapidly evolving financial landscape.

According to industry insiders, the Albilad CSOP MSCI Hong Kong China Equity ETF is expected to raise nearly $10 billion in funds, positioning it to become one of the largest ETFs in the Middle East. SAB Invest, a subsidiary of Saudi Awwal Bank, is also planning to introduce a second Hong Kong-focused ETF, which is projected to raise around $5 billion. Both ETFs are indicative of the closer financial collaboration between Saudi Arabia and China, a trend that is expected to accelerate in the coming years.

The cooperation between AlBilad Investment Co. and CSOP Asset Management is not a new development. In November of last year, Asia's first Saudi-focused ETF—CSOP Saudi Arabia ETF—was launched on the Hong Kong Stock Exchange. By mid-July of this year, two Saudi ETFs had already debuted on both the Shanghai and Shenzhen stock exchanges, further reinforcing the financial bridges between the two regions.

As Saudi Arabia continues to diversify its investment portfolio, these ETFs offer local investors a broader array of options, enabling them to tap into new opportunities across Asia. Zhang Hong, an expert from the Chinese Academy of Social Sciences, emphasized that this increasing collaboration reflects Saudi Arabia's strategic pivot towards strengthening ties with China as both nations seek to expand their capital markets.

In May 2024, Paul Chan, Financial Secretary of Hong Kong, highlighted the city's role as an international financial center during a forum. He noted that Hong Kong’s robust regulatory framework and open market environment make it an ideal platform for Saudi firms to raise capital. As the largest offshore renminbi (RMB) center in the world, Hong Kong provides unique opportunities for Saudi Arabia and other nations to allocate their offshore RMB assets, further enhancing the city's importance in global finance.

Chan also underscored the growing internationalization of the RMB, which is gaining increased traction in markets like Saudi Arabia. With over RMB 600 billion in Hong Kong’s offshore RMB pool and more than 70% of global RMB transactions settled through the city, Hong Kong is poised to become a pivotal player in Saudi Arabia's financial strategies.

As China and Saudi Arabia continue to strengthen their economic and financial links, the launch of the Albilad CSOP MSCI Hong Kong China Equity ETF is just the latest sign of an increasingly interconnected future.