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Saudi Arabia’s first investment-grade Sukuk ETF debuts in Hong Kong: The physically replicated Premia BOCHK Saudi Government Sukuk ETF began trading this past Thursday, offering investors direct exposure to government-issued sukuk denominated in SAR or USD, Premia Partners said in a post on LinkedIn.
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The fund carries a competitive annual total expense ratio (TER) of 0.35%, with the underlying sukuk carrying an A credit rating, reflecting low default risk. It tracks the iBoxx Tadawul Government & Agencies Sukuk Index — which includes only sukuk issued by the local government or its agencies.
The launch comes as Hong Kong seeks to boost connectivity with the Kingdom and the Middle East, HKEX CEO Bonnie Chan was quoted as saying by Bloomberg at Thursday’s Capital Markets Forum, co-hosted by Tadawul.
Looking ahead? Shariah-compliant sukuk and an REIT are among several products under review for cross-listing between Hong Kong and Riyadh, Hong Kong’s Securities and Futures Commission Julia Leung was quoted as saying by Reuters. “We’re very comfortable in the cross listing of whatever products,” Leung added.
ADVISIORS- Our friends at HSBC will provide trustee, custody, and administration services for the ETF in Hong Kong and Saudi Arabia, while S&P Dow Jones Indices has licensed its iBoxx Tadawul Sukuk Index to Premia Partners.
This is the latest of many Saudi and Chinese ETFs listed in Hong Kong, Shenzhen, Shanghai, and Riyadh since 2023. Bank Albilad rolled out the SAR 4.49 bn CSOP MSCI Hong Kong China ETF last October, followed by the Sab Invest Hang Seng Hong Kong ETF. Both launches came a month after the Capital Market Authority approved Saudi Arabia’s first Hong Kong-focused ETF for listing on Tadawul — a move that mirrored Hong Kong’s earlier decision to list a Saudi-focused ETF on the Hong Kong exchange in November 2023.
BUT- ETFs tracking Saudi and Chinese shares have seen limited trading and minimal capital influx, due to a “limited organic and natural demand for these products,” said Bloomberg Intelligence Analyst Rebecca Sin. “Despite their strong performance…most [of] the assets under management seems to have come at inception with cornerstone investors,” rather than drawing sustained interest from individual or mainstream institutional investors, Sin argued.
