HKEX Insight

Collaboration and capital flows require connectivity, and Hong Kong, as a gateway to China’s capital markets, is where these connections are being built.

In February 2023, HKEX and Saudi Tadawul Group (Tadawul) signed a Memorandum of Understanding (MoU) to explore cooperation in a number of areas that will bring mutual benefit to both organisations’ financial markets.

Under the MOU, HKEX and Tadawul will explore cooperation opportunities in Fintech, ESG and cross-listings.

In September 2023, HKEX announced that it had added Tadawul as a Recognised Stock Exchange (RSE), allowing companies listed on Tadawul’s Main Market to apply for a secondary listing in Hong Kong.

A year later in July 2024, HKEX expanded the list of RSEs to 19 across 17 countries by adding the Abu Dhabi Securities Exchange (ADX) and the Dubai Financial Market (DFM), enabling issuers with a primary listing on those exchanges to apply for a secondary listing in Hong Kong and demonstrating HKEX’s efforts to help Middle Eastern companies tap into Hong Kong’s vibrant capital markets.

As well as official delegations led by the Hong Kong SAR Government, HKEX has been actively engaging in key investment events in the Middle East, most notably the Future Investment Initiatives (FII) in Riyadh, Saudi Arabia, to promote Hong Kong’s role as a superconnector and international finance centre.

As a sign of deepening links, HKEX brought the first FII PRIORITY and Capital Markets Forum (CMF) to Hong Kong in December 2023 and May 2024, respectively, to connect investors and corporates in the two regions.

Building on new connectivity and increased dialogue, new products are being brought to market to channel investment flows between Hong Kong and the Middle East.

HKEX was the first exchange in Asia Pacific to launch a Saudi-focused ETF in November 2023, providing investors with direct access to Saudi Arabia’s capital market opportunities and attracting significant interest from both local and international investors.

Saudi Arabia’s Capital Market Authority has recently announced that it had granted approval to the two ETFs tracking Hong Kong-listed equities, which when listed on the Saudi Stock Exchange will mark another milestone for cross-region capital market connectivity.

Amid growth in connectivity and investment products, Middle Eastern sovereign wealth funds have been expanding their operations and investment focus in Mainland China and Hong Kong.

In 2023, Middle East-based sovereign wealth funds allocated US$2.3 billion into China, according to public reports. In August 2024, Saudi Arabia’s Public Investment Fund signed agreements worth up to US$50 billion with six major Chinese financial institutions. It has also announced plans to establish joint ventures with leading Chinese solar manufacturing companies to invest in Chinese tech firms.

On a corporate level, financial services firms based in the Middle East, Hong Kong and Mainland China are increasingly working together.

In December 2023, a Hong Kong-based online brokerage launched a new trading platform in partnership with a Saudi investment firm, allowing users to trade in both Saudi and US markets.

On the digital insurance front, a Hong Kong-based insurance company has entered into a partnership with a Saudi insurance firm to grow its presence in the Middle East to provide tech-enabled digital asset insurance and risk management solutions.

The Hong Kong SAR Government has introduced tax concessions, new management requirements, and relaxed beneficial interest thresholds and residency incentives to attract more family offices to Hong Kong.

The government has also announced in the Chief Executive’s 2024 Policy Address that it will consult the industry on the proposal to expand the scope of tax concessions to add qualifying transactions eligible for tax concessions for funds and single-family offices.

The government is targeting at least 200 additional single family offices by the end of 2025.

In 2023, Hong Kong Science and Technology Parks Corporation entered into partnership and collaboration agreements with innovation and technology entities in Saudi Arabia, Qatar, and the United Arab Emirates, promoting innovation and knowledge exchange between these regions.

Central banks in the Middle East and East Asia are collaborating to develop new digital trade settlement technology. In June 2024, Saudi Arabia joined the United Arab Emirates and Thailand in the Hong Kong Monetary Authority’s Project mBridge, a cross-border trade settlement platform denominated in China’s Central Bank Digital Currency.

Hong Kong entities are expanding their footprint in the Middle East.

Following the opening of an Economic and Trade Office in Dubai in 2021, the Hong Kong SAR Government is planning to set up an office in Riyadh, Saudi Arabia’s capital, to strengthen economic and investment ties between the two regions.

As well, many Mainland China and Hong Kong financial services institutions have boosted their on-the -ground presence in the Middle East in recent years.

With Cathay Pacific resuming direct passenger flights between Hong Kong and Riyadh, an increase in dialogues, business activities and capital flows between the two regions can be expected.

The huge capital pools in the Middle East and China have the potential to drive regional and global growth, and there are significant opportunities being presented by the economic diversification drive in the Middle East and the emergence of new productive forces and engines of growth in China.

And HKEX, with its world-leading fundraising platform, liquid, vibrant markets and unrivalled connectivity to onshore China markets, is uniquely positioned to connect two-way capital flows between the two regions.

HKEX is delighted be back at FII Institute’s FII8 in Riyadh this week, as well as hosting our first-ever HKEX Breakfast at FII. HKEX Chairman Carlson Tong, CEO Bonnie Y Chan and other HKEX representatives will be sharing their views on building more connectivity between the Middle East and Hong Kong.