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The door to direct investment in Saudi Arabia's capital market is slowly opening for domestic investors. The announcement shows that the highly anticipated Huatai-PineBridge CSOP Saudi Arabia ETF (520830, hereinafter referred to as "Saudi Arabia ETF") was officially listed and traded on the Shanghai Stock Exchange on July 16.

As one of the world's major oil exporters, Saudi Arabia has strong regional growth potential thanks to its scarce resources, stable macroeconomic environment and young population structure.

Since the launch of Saudi Arabia's "Vision 2030" in 2016, the Middle East's largest economy, which has embarked on a path of economic diversification, has become a hot spot for investment full of opportunities thanks to its practical reform measures, firm financial support, and strategic cooperation with other economies.

As the importance of global asset allocation increases, domestic investors are paying more and more attention to the Middle East market. Now, the opportunity to invest in the Middle East has finally arrived. It is understood that as one of the first domestic ETFs that can invest in the Middle East market, the Saudi ETF (520830) listed this time will closely track the FTSE Saudi Arabia Index through ETF cross-listing.

"The Saudi market has become an investment blue ocean that cannot be ignored," said Li Muyang, assistant director of the index investment department of Huatai-PineBridge Fund and manager of the Saudi ETF fund. "For investors, since access to the Saudi capital market is relatively limited and direct investment in the Saudi stock market is relatively difficult, they may consider sharing the Saudi economic potential through the Saudi ETF."

More than just an “oil powerhouse”

When it comes to Saudi Arabia, "oil power" may be the first impression that comes to most people's minds. According to statistics from the U.S. Energy Information Administration, as the world's second largest oil reserve country, Saudi Arabia's oil resources accounted for 17% of the world's total proven oil in 2022 and made an outstanding contribution to the country's GDP.

However, since the Saudi government introduced the "Vision 2030" in 2016, Saudi Arabia has been committed to getting rid of its dependence on a single industry and becoming a country that "has more than just oil." Developing renewable energy, promoting the development of science and technology and the digital economy, supporting small and medium-sized enterprises, promoting legal and judicial reforms, and relaxing secular social restrictions... A series of economic and social reforms have allowed the country to move forward at a high speed on the road of diversified transformation.

Benefiting from the transformation strategy, Saudi Arabia's economic development has been strong in recent years. Data shows that from 2017 to 2022, six years after the launch of the "Vision 2030", Saudi Arabia's GDP compound annual growth rate reached 8.9%, a rapid leap compared to the 3.9% annual GDP growth rate in the six years before the launch of the "Vision 2030". (Data source: Saudi Arabian Statistics Bureau, CSOP, calculated based on nominal GDP)

Since 2022, Saudi Arabia's per capita GDP has exceeded US$30,000 for two consecutive years. In 2023, Saudi Arabia's per capita GDP hit a record high of US$33,000, which is not only far higher than the world average of US$13,000, but also ranks first among the countries in the Middle East. (Data source: Saudi Arabian Statistics Bureau, International Monetary Fund)

As the economy develops rapidly, Saudi Arabia's industrial structure has become more balanced. According to the Saudi Arabian Statistics Bureau (GASTAT), the proportion of Saudi Arabia's non-oil economic activities in GDP exceeded 50% for the first time in 2023. Industry, mining, renewable energy, digital economy, entertainment and tourism are gradually becoming new growth points for Saudi Arabia's economy, and are also releasing more investment opportunities.

China-Saudi Arabia friendly exchanges open a new chapter

With firm determination and huge capital, Saudi Arabia, a new investment oasis, has quietly emerged, attracting the attention of global capital and becoming an important piece of the puzzle in global asset allocation. The considerable development potential has also led to the inclusion of the Saudi market in more and more important global indices.

It is understood that the FTSE Saudi Arabia Index tracked by Saudi ETF (520830) is a representative broad-based index reflecting the overall situation of the Saudi stock market. Due to the economic structure characteristics of Saudi Arabia as a country with physical assets, the past performance of its stock market has a low correlation with the stock indices of major global markets, providing an important diversified investment tool for investors' global allocation.

Specifically, the FTSE Saudi Arabia Index covers a number of Saudi Arabian economic pillar industries such as finance, materials, energy, utilities and telecommunications services, and includes more than 60 large and medium-sized Saudi listed companies. As of the end of the first half of 2024, the top three weighted stocks in the index are the world's leading Islamic bank, Bank Al Rajhi, the world's largest market capitalization giant Saudi Aramco, and Saudi Arabia's leading bank in terms of assets. (Data source: FTSE Russell, Bloomberg)

As my country's capital market enters a new stage of high-quality development, domestic investors' demand for diversified asset allocation and sharing the fruits of global economic development is also increasing.

Against this background, in June this year, Huatai-PineBridge NS East England Saudi Arabia ETF (QDII) became the first batch of approved Saudi ETFs, which means that my country's domestic public offering products have officially taken the first step in directly investing in the Saudi market.

In fact, the cooperation and exchanges between Saudi Arabia and China can be traced back thousands of years. During the ancient Silk Road period, the two places established close ties through trade and cultural exchanges. In the 1990s, China and Saudi Arabia formally established diplomatic relations, and bilateral relations have continued to deepen.

In December 2022, the heads of state of China and Saudi Arabia personally signed the "Agreement on Comprehensive Strategic Partnership between the People's Republic of China and the Kingdom of Saudi Arabia". In September 2023, the Shanghai Stock Exchange and the Saudi Stock Exchange signed a memorandum of cooperation in Riyadh, and the communication and cooperation between the capital markets of the two places entered a new stage; the issuance and listing of Huatai-PineBridge CSOP Saudi Arabia ETF (QDII) is an important milestone in the cooperation between China and Saudi Arabia in the financial field.

It is worth mentioning that Saudi Arabia ETF (520830) adopts the investment form of "Shanghai-Hong Kong mutual listing", that is, by investing in CSOP Saudi Arabia ETF, it can closely track the FTSE Saudi Arabia Index. The continuous exploration of the bilateral ETF mutual listing model not only deepens the connection and integration of domestic and foreign markets, but also becomes an important achievement in building a new pattern of "two-way opening" of domestic and foreign markets.

As a "trend pioneer" in the domestic ETF field, Huatai-PineBridge Fund also combined its own advantages and started the exploration of the two-way product layout of "bringing in and going out" early. Its Hang Seng Technology ETF (513130) and Southeast Asia Technology ETF (513730) are the first Shanghai-Hong Kong cross-listed ETF and Shanghai-Singapore cross-listed ETF in the market, and they have corresponding cross-listed products in overseas markets. (Hang Seng Technology ETF and Southeast Asia Technology ETF were established on 21/5/24 and 23/11/15 respectively)

Also on July 16, CSOP Huatai-PineBridge CSI 300 ETF was listed on the Hong Kong Stock Exchange as a "mutual partner" of Saudi Arabia ETF (520830). This product mainly helps foreign investors to deploy core A-share assets by investing in Huatai-PineBridge CSI 300 ETF (510300), the largest equity ETF in the A-share market. (Source of scale data: Shanghai Stock Exchange, as of 24/7/9)

Risk Warning: Funds are risky and investment should be cautious. If you need to purchase relevant fund products, please pay attention to the relevant regulations on investor suitability management, conduct risk assessment in advance, and purchase fund products with risk levels that match your own risk tolerance. The past performance of a fund does not indicate its future performance, and the performance of other funds managed by the fund manager does not constitute a guarantee of the fund's performance. This fund can invest in overseas securities markets and will also face special investment risks such as exchange rate risk and overseas securities market risk. Huatai-PineBridge CSOP Saudi Arabia Exchange Traded Open Index Securities Investment Fund (QDII) (this fund) is fully developed by Huatai-PineBridge Fund Management Co., Ltd. This fund has no connection with the London Stock Exchange Group and its subsidiaries (collectively referred to as the "LSE Group"), nor is it guaranteed, endorsed, sold or promoted by them. FTSE Russell is a trade name of the LSE Group. Pay attention to investment risks when investing in funds. Please carefully read the legal documents such as the fund contract, fund prospectus and product information summary to understand the specific situation of the fund.