Saudi Arabia's first exchange-traded funds (ETFs) that track Hong Kong-listed shares, mainly Chinese firms, are expected to be the largest such funds in the Middle East.

Trading of the product, which kicks off on Wednesday on the Saudi Stock Exchange, has raised more than $1.2 billion at the start, issuer Albilad Capital and its partner Hong Kong's CSOP Asset Management said.

The initial size will surpass the current largest Islamic ETF - Al Rayan Qatar ETF - listed on the Qatar Exchange, LSEG data shows.

As ties grow between Arab countries and Beijing and Hong Kong, the ETFs open doors for Middle East investors to gain easy access to capital markets in the world's second largest economy.

The Albilad CSOP MSCI Hong Kong China Equity ETF is sharia-compliant, CSOP said, adding that it invests in 30 stocks through a Hong Kong-listed ETF tracking the MSCI HK China Connect Select Index.

The top three holdings are delivery platform Meituan , power tools maker Techtronic Industries and sportswear maker Anta Sports.

The product "opens a new avenue for investors to engage with the dynamic growth of China through Hong Kong, all while adhering to Sharia principles," said Zaid AlMufarih, the chief executive of Albilad Capital.

Another ETF that tracks Hong Kong stocks, SAB Invest Hang Seng Hong Kong ETF, will be launched on Thursday by SAB Invest, an arm of Saudi Awwal Bank.

"At a time when Chinese markets have underperformed in recent years, this launch signals potential for value, particularly for investors in the MENA region, who are prepared to look past geopolitical friction," said Gary Dugan, chief executive of the Global CIO Office, based in Dubai.

The MSCI HK China Connect Select Index rebounded sharply in September and is up 12% for the first nine months amid a raft of stimulus policy measures by the Chinese government to boost the economy, but saw an annualised loss of 17.9% for the past three years.

Last November, Hong Kong launched Asia's first ETF tracking Saudi equities - CSOP Saudi Arabia ETF - and has been actively seeking cross-listing opportunities in both capital markets.

Hong Kong's financial secretary, Paul Chan Mo-po, led a delegation from the financial and innovation and technology sectors to visit the Saudi Arabian capital of Riyadh this week to attract new sources of capital.

The listing of Hong Kong ETFs in the Saudi market creates a win-win situation for both sides, Chan said.

(Reporting by Summer Zhen; Editing by Clarence Fernandez)