Shenzhen and Dubai pledge to increase cross-border ETF investing #NewsMarket

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The Shenzhen Stock Exchange and Dubai Financial Market have signed a memorandum of understanding to promote cross-border investing in China and the United Arab Emirates, including in the area of exchange traded funds.

The cities’ exchanges will also collaborate on dual-listings, shared displays of indices and fixed-income offerings, and helping investors tap the secondary markets of both nations, according to their announcement.

The bourses will jointly host roadshows and seminars, and conduct research and training to bolster their respective capital markets and enhance trading opportunities for listed companies. They will also work jointly on market and product development and regulation, and environmental, social and governance practices.

Hamed Ali, chief executive of DFM and Nasdaq Dubai, said the MOU was “a pivotal step in strengthening our cross-border ties, driving global investment opportunities and enhancing market accessibility”.

This article was previously published by Ignites Asia, a title owned by the FT Group.

The latest MOU between Shenzhen and Dubai comes as Chinese investors have sought to circumnavigate sluggish mainland stocks and take advantage of Beijing’s deeper ties in the Middle East.

The first two mainland Saudi Arabia ETFs, launched this year but hit their price rise upper limits on the week of their debut in July, causing a suspension of trading on the Shanghai exchange.

Fund managers say two factors underpin the strong interest in these funds: their ability to provide better returns compared with mainland equities strategies and their exposure to the Saudi Arabia market, which China has been courting for closer financial links.

China’s first two Saudi Arabia ETFs met with strong initial demand, raising more than Rmb1.2bn ($167.5mn) collectively, before being formally listed.

The China Southern Fund Management CSOP Saudi Arabia ETF QDII Fund attracted about Rmb634mn from 14,253 investors during its initial fundraising period between June 24 and July 2, according to the fund’s listing documents published on July 5.

Meanwhile, the Huatai-PineBridge CSOP Saudi Arabia ETF QDII Fund secured about Rmb590mn from 7,665 subscribers during the same period, according to the fund’s listing documents.

Hong Kong regulators have also urged asset managers to take advantage of emerging opportunities in the Middle East and in China’s onshore market in the wake of policy measures that have boosted ties with Gulf countries.

Hong Kong’s funds hub has historically been a gateway to Chinese capital, but the Securities and Futures Commission last month called the local funds industry to do more to capture growth opportunities in Middle Eastern markets.

Officials from Hong Kong last month secured an agreement with Abu Dhabi to co-operate on advancing investments from local players in each other’s jurisdictions.

That MOU is focused on fostering a “closer relationship” between Hong Kong and Abu Dhabi by facilitating inbound and outbound investments in both markets and sharing information on business environments and investment opportunities.

It also entails both government agencies being committed to helping local firms interested in setting up shop in the other’s jurisdiction.

*Ignites Asia is a news service published by FT Specialist for professionals working in the asset management industry. Trials and subscriptions are available at ignitesasia.com.