Beyond the traditional avenues like investing in American or Hong Kong stocks, Chinese investors are increasingly turning their gaze towards previously relatively closed markets, such as the Saudi Arabian stock market.
In March 2024, Southern Fund Management Company submitted an application to the China Securities Regulatory Commission (CSRC) for a new Saudi index fund Exchange Traded Fund (ETF), signaling that domestic investors are about to have a new option to invest in the Saudi market.
As disclosed on the CSRC’s official website, Southern Fund Management officially submitted the materials for the “Southern Fund Southern Dongying Saudi Arabia Exchange Traded Open Index Securities Investment Fund (QDII)” on March 4, 2024, and has received acceptance from the CSRC.
This move follows a significant action by Huatai Bairui Fund Management in December last year when they submitted a similar product, indicating the potential to offer mainland investors a more diversified channel for investing in the Saudi market.
The Saudi market has garnered attention due to its unique position and potential. As one of the world’s largest oil-producing countries, Saudi Arabia’s economic prowess cannot be underestimated.
However, due to market access restrictions and high investment thresholds, direct investment in the Saudi stock market is not an easy task for most Chinese domestic investors.
Therefore, the launch of Saudi index fund ETF undoubtedly opens a door for Chinese investors to the Saudi market.
The ETF product submitted by Southern Fund Management this time is expected to invest in the Saudi Arabia ETF listed by Southern Dongying Fund on the Hong Kong Stock Exchange.
At the end of November last year, the Southern Dongying Saudi Arabia ETF was successfully listed on the Hong Kong Stock Exchange, becoming the first ETF product in the Asia-Pacific region focused on the Saudi market.
Since its listing, the ETF has shown strong performance, with a cumulative increase of 11.71% as of the closing of March 4, demonstrating the promising investment potential of the Saudi market.
The investment strategy of the Southern Dongying Saudi Arabia ETF closely tracks the FTSE Saudi Arabia Index (Net Total Return).
This index covers more than 50 large and medium-sized listed companies in Saudi Arabia, including Saudi Aramco. In terms of industry distribution, sectors like finance, raw materials, energy, and communications dominate, closely related to the economic structure of the Saudi market.
Giant companies in these industries, such as Saudi Aramco and SABIC, enjoy a reputation in Saudi Arabia and globally, providing investors with abundant investment opportunities with their stable operations and sustained growth.
It is worth noting that the Saudi Stock Exchange (Tadawul) has also made significant progress in recent years as Saudi Arabia’s main securities trading market.
As of now, Tadawul has more than 230 listed companies, with a total market capitalization reaching an astonishing 10.673 trillion Saudi Riyals (approximately $2.85 trillion). This scale ranks it 11th in the global market capitalization ranking, fully demonstrating the depth and breadth of the Saudi market.
The second Saudi index fund ETF submitted by Southern Fund Management provides new opportunities for domestic Chinese investors to invest in the Saudi market.
With the continuous opening up and maturation of the Saudi market, as well as the increasing attention and participation of Chinese investors in overseas markets, we have reason to believe that this new investment tool will become an important bridge connecting the capital markets of China and Saudi Arabia.