Saudi Arabia and China’s stock exchanges recently entered into a Memorandum of Understanding (MoU) to “promote mutual development and cooperation.” This is according to a statement by the Shanghai Stock Exchange.
The latest development in the two countries’ growing ties will seek to explore ways of cross-listing stocks, fintech, exchange-traded funds (ETFs), and data exchanges, among others.
Khalid Abdullah Al-Hussan, the chief executive officer of Saudi Tadawul Group, expressed, “This partnership will help facilitate greater connectivity between Saudi Arabia and China and encourage companies in both countries to consider cross-listing.” Saudi Tadawul Group is the company behind the Saudi stock exchange Tadawul.
Cross-listing ETFs
In an exclusive report in August, Reuters revealed that Saudi and China have been discussing the potential listing of ETFs on each other’s exchanges.
ETFs are similar to mutual funds, wherein investors can pool their capital into a fund that invests in stocks and bonds, among other assets. However, unlike mutual funds, ETFs can be traded like regular stocks on exchanges.
Currently, iShares MSCI Saudi Arabia ETF KSA is the largest and best-performing Saudi Arabia ETF, with net assets worth $958 bn as of writing. This ETF, incorporated in the US, provides one of the easiest ways for people to invest in Saudi’s oil giant, Aramco.
In the past years, Saudi and other Middle Eastern countries have been continuously attracting investors, thanks to the impressive returns offered by their top-performing funds. The MSCI index of Saudi grew by 44 percent over the last five years. Meanwhile, Kuwait and the United Arab Emirates (UAE)’s indices rose by 70 and 32 percent, respectively. MSCI, short for Morgan Stanley Capital International, is a leading provider of worldwide indices and benchmark-associated products and services to investors.
Read: Saudi’s Aramco pondering selling more shares before end of 2023
Growing economic ties
Saudi Arabia and China have been drawing closer on both political and economic fronts.
During the Saudi-China Business Forum in Beijing, Saudi and Chinese entities inked housing agreements worth a substantial $1.33 bn. Additionally, Aramco secured a noteworthy 10 percent stake in China’s Rongsheng Petrochemical Co. Ltd in July.
June saw Saudi Arabia hosting the Arab-China Business Conference. The landmark event that resulted in agreements valued at over $10 bn between Chinese and Gulf organizations.
In terms of trade, Saudi Arabia emerged as China’s top oil supplier in 2022. In addition, Saudi Arabia has been offered membership in BRICS. The economic alliance is composed of Brazil, Russia, India, China, and South Africa. Alongside the UAE, Egypt, Iran, Ethiopia, and Argentina, Saudi will be part of the bloc from January 1 next year. Earlier in March, China played a pivotal role in facilitating the normalization of relations between Saudi Arabia and Iran.
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