Asia’s first investment-grade government sukuk exchange-traded fund (ETF) was listed on the Hong Kong Stock Exchange on Thursday, marking a significant step in the special administrative region government’s efforts to expand into Middle Eastern capital markets.

The Premia BOCHK Saudi Arabia Government Sukuk ETF tracks the performance of Saudi government bonds, providing Asian investors with a new avenue to access Saudi Arabia’s burgeoning markets.

“The ETF’s uniqueness is its single-country focus on Saudi Arabia government sukuk,” said Mara Dobrescu, a senior principal and director of manager research at Chicago-based financial services firm Morningstar.

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“Other ETFs available cross-border, such as the iShares $ Sukuk UCITS ETF or the HSBC Global Sukuk UCITS ETF, are globally diversified, and most include corporate sukuk as well,” Dobrescu said.

“In terms of management fees, the newly listed ETF’s management fees are 0.35 percent per annum. As for those more-diversified sukuk ETFs, in the case of HSBC and iShares, their management fees are 0.40 percent,” Dobrescu said.

The launch took place at the second Capital Markets Forum Hong Kong, co-organized by the Hong Kong Exchanges and Clearing Ltd and the Saudi Tadawul Group on Thursday and Friday. The event attracted over 500 financial leaders, regulators, investors, and corporate representatives to discuss the evolving landscape and opportunities in Asian and global capital markets.

Hong Kong Financial Secretary Paul Chan Mo-po said the listing of the first sukuk ETF in Hong Kong reflected the innovation of Hong Kong’s financial products, the joint efforts by government and business sectors, and the HKSAR government’s proactive attitude of providing policy convenience.

“Islamic financial markets are huge, and Saudi Arabia and the Gulf States are focusing on economic diversification,” Chan said. He called on Hong Kong’s financial sector to develop products that meet the demands of these markets while adhering to their religious and regulatory standards.

A sukuk is a bond-like financial certificate that complies with Islamic religious law, Shariah, which prohibits certain types of trades and the charging of interest.

HKEX CEO Bonnie Chan Yi-ting applauded the financial secretary’s comments. “HKEX will open an office in Riyadh, the capital of Saudi Arabia, this year, as the wave of interconnection between Hong Kong and the Middle East market has generated huge momentum.”

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The world’s largest Saudi ETF, CSOP Saudi Arabia ETF, with dual trading counters in Hong Kong dollars and renminbi, was listed in Hong Kong in November 2023, and currently manages about HK$10 billion in assets. After that, Saudi Arabia launched two ETFs tracking the Hong Kong stock market last year.

“HKEX is committed to building infrastructure and collaborating on initiatives that offer Asian investors new ways to capitalize on the exciting opportunities of the Gulf region, driving two-way capital flows between Asia Pacific and the Middle East,” Bonnie Chan said.

The Hong Kong stock market also showed positive momentum on Thursday, with the benchmark Hang Seng Index rising 1.35 percent to 23,573 points.

The Hang Seng China Enterprise Index, the barometer of mainland-based company performances, edged up 1.37 percent to close at 8,560 points, while the Hang Seng Tech Index, the city’s technology stock gauge, increased 2.46 percent to 5,302 points.

Xinhua contributed to this story.

Contact the writer at thor_wu@chinadailyhk.com