Hong Kong, Saudi Arabia formalise economic and financial relations
[HONG KONG] Hong Kong and Saudi Arabia have formalised their economic and financial ties, following months of high-level exchanges since Chinese President Xi Jinping’s groundbreaking visit to Riyadh in December last year.
Hong Kong Chief Executive John Lee on Thursday (Dec 7) hailed the arrival of a high-level delegation led by Yasir Al-Rumayyan, governor of the Public Investment Fund, the kingdom’s US$700 billion sovereign wealth fund, as “yet another significant step forward in the deepening ties between Hong Kong and the Middle East, particularly the Kingdom of Saudi Arabia”.
Lee said his trip in February to Saudi Arabia and the United Arab Emirates (UAE) had led to a slew of agreements being signed since then.
He highlighted ongoing negotiations for an investment promotion and protection agreement, and the listing on the Hong Kong Stock Exchange (HKEX) last week of an exchange-traded fund (ETF) that tracks the FTSE Saudi Arabia Index.
The ETF listing allows investors in Hong Kong to invest in Saudi’s leading constituent stocks.
Lee was speaking at an event hosted in Hong Kong by Saudi Arabia’s Future Investment Initiative Institute (FII) and HKEX.
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“Hong Kong is the world’s pre-eminent gateway and a super value-adder for economies, cultures and peoples, East and West,” Lee said. “Of course, all this is made possible by the unique one country, two systems principle. It affords us unparalleled access to mainland China and the rest of the world.”
He noted Hong Kong’s achievements in three areas: finance, innovation and sustainability.
He cited the rising number of fintech companies in the city, which jumped by 25 per cent over last year, to 1,000, in digital payment technology, decentralised finance, and digital identity. He also pointed out the government’s investment of more than US$25 billion in the innovation and technology sector, as well as US$30 billion towards meeting its green policy goals.
In the area of fintech, Lee noted Hong Kong’s real-time online payment system, called the Faster Payment System, which it is extending to Asean economies starting with Thailand, so merchants can receive funds immediately.
Hong Kong is the hub, he said, for digital currency payments between the central banks of China, Thailand the UAE and the Bank for International Settlements. “It speeds up cross-border payments at a reduced cost and with enhanced transparency,” he said.
Hong Kong is planning to establish an artificial intelligence (AI) and supercomputing centre next year, to meet the rising demand in these areas. “It will support the huge demand for computing power from R&D and other sectors,” he said.
Lee said that green and sustainable debt arranged or issued in Hong Kong exceeded US$18 billion, and its green bond issuances accounted for about one-third of Asia’s total.
In a speech at the event, HKEX chair Laura Cha said that significant progress had been made in the past year in deepening connections between Hong Kong and the Middle East to allow two-way flows of opportunity.
“To appreciate the importance of global connectivity, we only need to look at the opportunities emerging in Saudi Arabia and the Middle East, or the diversification and the capital-raising opportunities presented by China and a rising Asia,” she said.
She cited the signing of an agreement with the Saudi stock exchange operator, the Saudi Tadawul Group, which covers financial technology, cross-listings, the environment, governance, and other areas.
Khalid Al Hussan, CEO of the Saudi Tadawul Group, said earlier this year that it sought to position the Saudi capital market as an investment hub between East and West, to reflect increased interest from issuers and investors in Asia.
During his February visit to the Middle East, Lee met Saudi Arabia’s Minister of Investment Khalid Al-Falih and Minister of Communications and Information Technology, Abdullah Alswaha, as well as state-owned oil company Saudi Aramco’s president and CEO Amin H Nasser.
Lee discussed issues ranging from supporting Aramco’s secondary listing in Hong Kong to helping future funding arrangements and the diversification and protection of assets. In total, Hong Kong signed six bilateral agreements with Saudi Arabia during the trip.
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