Shanghai Stock Exchange Photo:CFP

Two exchange-traded funds (ETFs) tracking large Saudi companies, including Saudi Aramco, made successful debuts in the Chinese mainland stock market on Tuesday, and their values rose by the daily limit of 10 percent, with a premium of more than 6 percent, highlighting the strengthening links between the financial markets in China and the Middle East.

According to statistics from Wind, a domestic financial data provider, the total turnover of the two ETFs reached 4.896 billion yuan ($673.8 million) on the first day of trading.

As the first Shanghai-Hong Kong ETF to invest in Saudi Arabia, the Saudi ETF, which debuted in Shanghai's stock market on Tuesday, closely tracks the FTSE Saudi Arabia Index. It covers more than 50 medium-sized and large companies listed in the Saudi market, including those in finance, raw materials, energy, utilities and communications.

The Saudi ETFs offer Chinese investors easy access to previously inaccessible markets. They enable domestic investors to invest directly in the Saudi market, while helping to promote financial cooperation between China and Saudi Arabia and promote the diversification of global asset allocation, industry observers said.

They also noted that investors in China and the Middle East have a two-way relationship with each other's markets. 

With the increasing need for energy transformation and economic diversification of the Middle Eastern countries, China's emerging industries, such as the digital economy, artificial intelligence and new energy, have become the focus of Middle Eastern capital, which explains why investment in China by funds from these states is surging, observers said.

Over the past year, several Middle Eastern sovereign wealth funds have invested about $2.3 billion in the Chinese market. The investment capital of Middle Eastern sovereign funds is expected to increase to $10 trillion by 2030, industry data showed.

Saudi Arabia's Public Investment Fund (PIF) plans to set up an office in Beijing by the fourth quarter of 2024 or perhaps the first quarter of 2025, China Fund News reported on Friday, citing Abdulmajeed Alhagbani, a manager at PIF.

Yasir Al-Rumayyan, governor of PIF and chairman of Saudi Aramco, paid a one-week visit to China starting on July 9, during which he met several Chinese officials involved in economic and financial issues.

Reuters reported in June that a Qatar sovereign wealth fund had agreed to buy a 10 percent stake in China's second-largest mutual fund company, citing sources.

The increase in Chinese assets by Middle Eastern wealth funds is a response to global restructuring in the financial markets. It also shows the confidence and optimism of institutions from the Middle East in China's economic development, Dong Shaopeng, a senior research fellow at the Chongyang Institute for Financial Studies at the Renmin University of China, told the Global Times.

"China's economy is relatively stable and still in the recovery stage, and the potential return on investment is high," said Dong.

Investors should remain confident and patient, as China's economy will soon witness three important inflection points - surging economic growth in the second half of 2024, more supportive and encouraging policies, and a stock market recovery with more capital inflows, Yang Delong, chief economist at Shenzhen-based First Seafront Fund, told the Global Times on Tuesday.

Both A shares and Hong Kong shares are trading at historically low valuations, Yang said. 

However, from mid-April, foreign capital began to return to A shares and Hong Kong stocks. "This indicates that the rebalancing of global capital has shifted again, which will lift the A-share and Hong Kong share markets."