(Yicai) June 25 -- Two Chinese asset managers have launched the country’s first Saudi Arabia exchange-traded funds, offering mainland investors exposure to the stock market of the world’s 17th largest economy.

Huatai-PineBridge Investments, the joint venture of Huatai Securities and PineBridge Investments, and China Southern Asset Management opened their Saudi ETFs to investors yesterday, with subscriptions ending on July 2. The first will be listed on the Shanghai Stock Exchange, and the second on the Shenzhen Stock Exchange.

The asset managers seek to raise CNY1 billion (USD137.7 million) for each of their Saudi ETFs, according to their earlier statements issued on June 19.

The two ETFs will indirectly invest in the Saudi stock market through the CSOP Saudi Arabia ETF [HKG: 2830], which was listed on the Hong Kong Stock Exchange by CSOP Asset Management, a unit of China Southern Asset, on Nov. 29. It was the first Saudi Arabia-focused ETF in the Asia-Pacific region.

The CSOP Saudi Arabia ETF tracks the FTSE Saudi Arabia Index. At the end of May, the five most weighted sectors in the FTSE Saudi Arabia Index were financial, raw materials, energy, utilities, and communications, at 42 percent, 17 percent, 9.5 percent, 9.2 percent, and 7.7 percent, respectively. Among the top 10 constituent stocks, there are five banks, including Al-Rajhi Bank and the Saudi National Bank.

“The listed companies in Saudi Arabia are mainly financial institutions and resource companies that maintained high dividends in the past few years, providing a variety of choices for global investors,” Wang Yi, head of quantitative investment at CSOP, told Yicai.

The reason why energy stocks only account for less than 10 percent of the FTSE Saudi Arabia Index is that most of the main stocks in the Saudi capital market are in the financial utilities sectors, while the proportion of oil-related companies is low, an index fund manager told Yicai.

The top five weighted sectors of the index are in line with the economic structure of Saudi Arabia, with balanced and diversified investment targets, the index fund manager added.

“Unlike other emerging market countries where economic growth is largely dependent on foreign investment, Saudi Arabia is driven by internal reforms and government expenses,” Wang noted, adding that the huge revenues from the oil business provide a strong guarantee for the implementation of the Middle Eastern country’s economic projects.

Since Saudi Arabia has a strong exchange rate policy keeping a lock between its currency and the US dollar, the local capital market is almost unaffected by foreign exchange fluctuations, Wang points out. This gives global investors a unique opportunity to invest in emerging markets with stable exchange rates.

Editor: Futura Costaglione