Invesco has launched the first ETF in Europe that provides pure passive exposure to Saudi Arabia, offering investors access to the largest economy in the Middle East. The Invesco MSCI Saudi Arabia UCITS ETF is available in USD on the London Stock Exchange.
Chris Mellor, Head of EMEA ETF Equity and Commodity Product Management at Invesco, says: “Saudi Arabia is in the early stages of an exciting transformation. The reforms within the ‘Saudi Vision 2030’ programme are intended to reduce the economy’s dependency on government funding and oil exports. They have a number of objectives, including increasing the contribution of private sector consumption to GDP, the number of Saudis working in the private sector and the use of solar and other renewable energy sources. They also want to encourage major domestic companies to expand across borders and into global markets.”
Another objective is to attract foreign direct investment and, in fact, the programme is going to be partly funded by a 5 per cent sale of state-owned oil giant Saudi Aramco. The IPO is likely to be in 2019 and could raise up to USD100 billion, making it by far the largest IPO in history.
Saudi Arabia began opening its equity markets to foreign investors in 2015, and has since eased foreign investor requirements and brought trade settlement more in line with global standards. As a result, MSCI has included Saudi Arabia in its annual review process, with an announcement due on 20 June 2018 as to whether they will raise it to Emerging Market status. If successful, Saudi Arabia would be included in the MSCI Emerging Markets Index from 2019 with an estimated weighting of around 2.3 per cent, although this would be significantly higher once you factor in Aramco and other IPOs.
Pietro Poletto, Head of Fixed Income and Listed Products, London Stock Exchange Group says: “London is the premier listing and trading venue for ETFs in Europe and we are delighted that Invesco has chosen to issue its first European product tracking the Saudi Arabian market here. This is the first of its kind in Europe and demonstrates the dynamic growth of the industry and London’s ability to offer the widest diversity of products and access to international investors. We are seeing exciting growth in the number of listings and trading activity on our markets and expect appetite for these products to remain very strong.”
The Invesco MSCI Saudi Arabia UCITS ETF tracks the performance of the MSCI Saudi Arabia 20/35 index, which has constraints to ensure it meets UCITS requirements for diversification and avoids overconcentration in certain parts of the economy. The index comprises 22 large- and mid-cap stocks, accounting for approximately 85 per cent of the free float market capitalisation in Saudi Arabia.