Chinese Investors Flock to Saudi ETFs for Better Returns
In a bid to diversify their portfolios and seek higher returns, Chinese investors are increasingly turning to two newly launched exchange-traded funds (ETFs) tracking Saudi stocks. The move comes as local equity performance lags and foreign assets appear more appealing, as reported by Bloomberg.
Robust Start for Saudi-Focused ETFs in Chinese Markets
The Saudi-focused ETFs made a strong debut on July 16 in Shanghai and Shenzhen, with each soaring by the daily limit of 10 percent on their first two trading days. However, trading was temporarily halted on July 18 due to the share prices of the ETFs exceeding their net asset values by too high of a premium.
Strengthening Economic and Trade Relationships between China and Saudi Arabia
The increased interest in these ETFs can be attributed to the growing economic and trade ties between China and Saudi Arabia. Recent billion-dollar deals in industries like technology, solar power, and electric vehicles have further fueled this trend.
Encouraging Investment Climate between China and Saudi Arabia
Chinese investors are seeking better returns from overseas assets due to low yields from domestic investments, according to Nelson Yan, co-chief investment officer at Fosun Wealth International in Hong Kong. The favorable investment climate between China and Saudi Arabia, with lower geopolitical risks, is also a driving factor.
Premium Trading for Saudi ETFs in Chinese Markets
The Huatai-PineBridge CSOP Saudi Arabia ETF QDII and China Southern Asset Management CSOP Saudi Arabia ETF QDII traded at premiums of up to 17 percent and 6 percent, respectively, over their net asset values. This is significantly higher than the typical 1 percent premium seen in most ETFs, as noted by ETF.com.
Strong Economic Ties between Saudi Arabia and China
The two Saudi ETFs track the FTSE Saudi Arabia Index, with major weightings in financials, basic materials, and energy companies. Notable companies like Al Rajhi Bank, Saudi Aramco, and Saudi National Bank make up a significant portion of the index.
Continued Growth in Economic Relations
Economic ties between Saudi Arabia and China have been on the rise, with the signing of a $6.93 billion local currency swap agreement between the Kingdom’s central bank (SAMA) and the People’s Bank of China. The agreement, lasting three years with room for extension, underscores the deepening financial cooperation between the two countries.