Aerial photo taken on May 31, 2022 shows the Two International Finance Centre (IFC) (top L) and the International Commerce Centre (ICC) (R) in south China's Hong Kong. (Xinhua/Li Gang)

The first Saudi exchange-traded fund (ETF) that tracks Hong Kong stocks was listed on the Saudi stock exchange on Oct. 30 (Riyadh time), marking a new milestone in the financial and trade relations between Hong Kong and the Middle East.

Paul Chan, the Financial Secretary of the Hong Kong Special Administrative Region (HKSAR) government, along with a business delegation visited Saudi Arabia's Riyadh at the end of October to witness the moment.

At the listing ceremony, Chan said the ETF will create a win-win situation by attracting more investors to the Hong Kong market while fostering the development of the ETF market in Saudi Arabia.

In recent years, the economic and trade relations between Hong Kong and the Middle East have been increasingly deepened due to the current-term HKSAR government's ongoing efforts to promote cooperation in economy, trade, finance, and other areas between the two places.

Chan and the delegation comprising representatives from the financial services and innovation departed for Riyadh on Oct. 28. During the visit, they attended the eighth edition of the Future Investment Initiative (FII).

Through a series of activities, including bilateral meetings, breakfast meetings, round-table discussions, and cross-sector investment presentations, the delegation promoted deeper exchanges and discussions between Hong Kong's financial and innovation sectors, and relevant institutions and representatives from the Middle East.

John Lee (1st L), chief executive of the Hong Kong Special Administrative Region (HKSAR), listens to a briefing by a representative of Aldar Properties PJSC in Abu Dhabi, the United Arab Emirates (UAE), on Feb. 7, 2023. (Information Services Department of the Government of the HKSAR/Handout via Xinhua)

While attending the FII, Chan witnessed the signing of cooperation agreements between a number of Hong Kong organizations and enterprises with their counterparts in Saudi Arabia, including the Hong Kong Monetary Authority, signed a memorandum of understanding (MoU) with the Saudi Arabia Public Investment Fund to jointly establish a new investment fund of up to 1 billion U.S. dollars.

Over the past two years, the HKSAR government visited the Middle East multiple times. In 2022, Chan participated in the FII meeting in Saudi Arabia and successfully lobbied for the first FII Priority Asia Summit to be held in Hong Kong in 2023, during which the first Saudi ETF was listed on the Hong Kong Stock Exchange.

The Middle East is a key link in China's Belt and Road Initiative. In February 2023, HKSAR Chief Executive John Lee led a high-level delegation, including HKSAR government officials and representatives from various sectors, including finance, industrial and commercial, trade, and innovation and technology to visit the Middle East region.

During the visit, the delegation promoted Hong Kong's unique advantages to the governments and business sectors in Saudi Arabia and the United Arab Emirates. The visit was very fruitful, with Hong Kong and the enterprises and institutions of the two places signing a total of 13 high-quality MoUs or letters of intent, building a solid foundation for the long-term development of Hong Kong businesses in the Middle East region, while simultaneously attracting Middle Eastern businesses and capital to invest in Hong Kong.

Lee described the visit as a journey of friendship and a journey to promote Hong Kong's strengths and explore business opportunities. It also facilitated the agreement between the governments of Hong Kong and Saudi Arabia to initiate formal negotiations for an investment promotion and protection agreement. Additionally, the governments of Hong Kong and the UAE have agreed to start discussions on signing a MoU to develop green and sustainable financial cooperation.

On Dec. 7, 2023, Invest Hong Kong and the Ministry of Investment of Saudi Arabia signed a MoU to enhance cooperation on investment promotion between the two places. It strengthened economic relations in the promotion of direct investment by encouraging the exchange of visits and expertise, organizing events such as meetings and conferences, exchanging information related to business and investment climate, etc.

Apart from signing the MoU, Hong Kong has also launched formal negotiations with Saudi Arabia on an Investment Promotion and Protection Agreement (IPPA), and both sides intend to conclude the negotiations as soon as possible. The IPPA aims to protect, enhance and open investment, help strengthen investor confidence and increase bilateral investment flows to boost closer economic relations between Hong Kong and trade partners.

In 2023, the UAE was Hong Kong's largest trading partner in the Middle East, according to Lee. In his latest policy address, Lee proposed proactively expanding markets and deepening overseas networks, including the Middle East.

Photo taken on July 31, 2021 shows the statues on the square of Hong Kong Exchanges and Clearing Limited (HKEX) in south China's Hong Kong. (Xinhua/Wu Xiaochu)

"We will continue to actively expand and deepen our overseas networks, including forging financial cooperation with the Middle East and the region of the Association of Southeast Asian Nations, organizing more international financial mega-events, and exploring further collaboration with Islamic markets in the area of finance," Lee said when delivering his policy address on Oct. 16.

The Hong Kong Economic and Trade Office (ETO) in Dubai came into operation in October 2021, which is the first ETO in the area. Its opening is conducive to strengthening the ties between Hong Kong and our regional trading partners.

In September 2024, Lee said that the HKSAR government plans to set up an office in Riyadh, Saudi Arabia's capital. It will help the HKSAR government better serve the region, and Hong Kong businesses looking to explore the Middle East market.

The progress of strengthening ties between Hong Kong and the Middle East region was achieved step-by-step, involving the efforts and dedication of various sectors. The Hong Kong Exchanges and Clearing Limited (HKEX) announced on Oct. 30 that it plans to open an office in Riyadh in 2025 to strengthen HKEX's Middle East presence as it looks to promote greater connectivity between China and the Gulf region to facilitate new opportunities for its customers and issuers around the world.

HKEX Chief Executive Officer Bonnie Chan said that opening a Middle East office in Riyadh will further consolidate the cooperation between HKEX and the Middle East. It will also underscore HKEX's strategic commitment to promoting greater capital market connections between China and the Middle East, while supporting the ambitions of HKEX's broad range of customers from the region and around the world.

Concluding his visit to Riyadh in October, Chan said that various sectors in Saudi Arabia agreed that Hong Kong is a "super connector", capable of linking international capital and emerging markets.

Chan said that Saudi Arabia's interest in Hong Kong, the Chinese mainland and the Asian markets, as well as in attracting capital, is much greater than the HKSAR government expected. Hong Kong and Saudi Arabia should strengthen exchanges in areas of innovation, technology, and talent.