HKEX: Agreement with Tadawul may contribute to HK-Saudi cross listings

Nicolas Aguzin, CEO of Hong Kong Stock Exchange (HKEX)

Nicolas Aguzin, CEO of Hong Kong Exchanges and Clearing Limited (HKEX), said the agreement with the Saudi Exchange (Tadawul) may contribute to the cross listing of financial products on Hong Kong and Saudi markets, including exchange-traded funds (ETFs).

HKEX and Tadawul signed a memorandum of understanding (MoU) in February this year, aimed at exploring strategic cooperation opportunities, marking the beginning of even greater collaboration between the companies and their home markets. Among others, the MoU will facilitate cross listings of financial products, such as stocks and ETFs, on both the Hong Kong and Saudi exchanges, enabling investors to access the corporate portfolios in these markets, driving investor interest, enhancing market liquidity, and increasing awareness of Saudi companies, Aguzin told Argaam at the Future Investment Initiative (FII) Summit in Riyadh.

Aguzin believes the stronger collaboration and connectivity between the two financial markets will, in turn, develop a more interconnected global financial ecosystem and economic growth in Asia, the Middle East, and beyond.

He indicated that HKEX added Tadawul to the list of recognized stock exchanges in September, allowing companies listed on Tadawul’s main market to apply for a secondary listing in Hong Kong.

Aguzin pointed to the macro changes that occurred over the past few decades in the East and the growing importance of Asia, which constitutes 40% of the global economy and is expected to dominate nearly 50% over the next five-10 years.

China contributed to the rapid development in Asia. Meanwhile, the Middle East, which is abundant in vital energy resources, focuses on economic diversification, as these regions are ideal to reach their respective strengths.

Further, the CEO said HKEX welcomes companies from all over the world to list in Hong Kong, provided that they meet the exchange’s listing rules and requirements. He also noted that HKEX does not target specific companies in the Saudi market, but rather all businesses with capital raising needs and investors looking to diversify their portfolio to Asia.

Aguzin highlighted the recent initiative to create a specialized technology listing framework for innovative companies that may still be in the research and development phase and have not commercialized their products.

This adds to the success of previous listing reforms in Hong Kong to accommodate the listings of new economy companies. Hong Kong is now one of the leading markets that support the fundraising needs of technology, biotech and healthcare companies, which require significant investment before generating revenue and earnings. Since new rules to welcome innovative companies took effect in 2018, Hong Kong has emerged as one of the world’s leading biotech and healthcare fundraising hubs, with over 120 companies raising HKD 270 billion ($34 billion), half of which were pre-revenue biotech companies, he said.

HKEX, according to the CEO, listed up to 53 companies since the beginning of 2023, with more than 110 companies that have filed for listing. He notes that the current global IPO landscape remains muted, as compared with previous years.

This is attributed to various global challenges, such as geopolitical tensions, as well as high interest rates that have an impact on valuations. The current environment has redirected capital flows from equities to fixed income, resulting in lower average daily trading volumes in most markets, he further explained.

These challenges are normal, as markets have fluctuating cycles. However, Aguzin is optimistic about the future development of Hong Kong’s and Asia’s markets, as companies still look for new funds to fuel their growth and investors eager to invest in new opportunities.

Hong Kong is an international market that welcomes companies and investors from all over the world. Hong Kong is also home to the exclusive Stock Connect programme, a mutual market platform that links Hong Kong’s equities market with those in Mainland China. Stock Connect supports investors from both markets to trade on each other’s market. A recent enhancement in the Connect programme allows Mainland China’s investors to trade the shares of international companies that are listed in Hong Kong, giving these issuers access to the large base of retail investors in Mainland China, while enjoying the regulatory advantages and reputation of the Hong Kong market.

The average daily trading volume on the stock exchange is about HK$110 billion (US$14 billion), while the derivatives market, which has products with underlying from Greater China and across Asia, trades nearly 1.3 million contracts per day.