China and Saudi Arabia’s stock exchanges are in talks to allow exchange-traded funds (ETFs) to list on each other’s bourses, three sources familiar with the matter said, as the countries look to deepen financial ties amid warming diplomatic relations.
The talks are in the early stages, said the sources, and could mark a major first step by Beijing and Riyadh towards broadening cooperation beyond energy, security, and sensitive technology sectors.
The Shenzhen Stock Exchange, one of the two major bourses in the Chinese mainland, is in negotiations with the Saudi Tadawul Group, operator of the Saudi Stock Exchange, for ETF Connect, as the programme is called, two of the sources said.
For China, an ‘ETF Connect’ tie-up with Saudi Arabia will be the first such beyond East Asia and affirm a commitment to open up its trillions of dollars-worth of financial markets to international investors. Some of China’s biggest ETF operators have been notified in recent months about the possibility of a cross-listing agreement with Saudi Arabia and some are considering the option, one of the sources said.
The China Securities Regulatory Commission, the Shenzhen Stock Exchange and the Tadawul Group did not respond to requests for comment. The sources declined to be named.
The cross-listing of ETFs will allow investors to trade funds tracking specific stocks or bond indexes listed on each other’s stock exchanges. At the end of June, a total of 886 ETFs worth $256.8 billion were listed on the Chinese and Hong Kong bourses, according to Morningstar’s data.
Saudi Arabia’s ETF market is relatively nascent with only eight products listed on the exchange, although it is one of the biggest stock markets in emerging markets with a $2.7 trillion capitalisation.
Published in The Express Tribune, August 5th, 2023.
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