Invesco has launched its first exchange traded fund (ETF) in Europe that provides pure passive exposure to Saudi Arabia, giving investors access to the largest economy in the Middle East.
The Invesco MSCI Saudi Arabia Ucits ETF is available in US dollars on the London Stock Exchange.
The Invesco MSCI Saudi Arabia Ucits ETF tracks the performance of the MSCI Saudi Arabia 20/35 index. The index has constraints to ensure it meets Ucits requirements for diversification and avoids overconcentration in certain parts of the economy.
The index comprises 32 large- and mid-cap stocks that account for about 85% of the free float market capitalisation in Saudi Arabia.
On Wednesday, MSCI announced that it will include the MSCI Saudi Arabia Index in the MSCI Emerging Markets Index from 2019.
The MSCI Saudi Arabia Index, on a pro forma basis, represents a weighting of about 2.6% of the MSCI Emerging Markets Index.
MSCI said the decision follows the implementation in the Saudi Arabia equity market of a number of regulatory and operational enhancements which effectively increased the opening of the market to international institutional investors.
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.
Chris Mellor, head of Europe, the Middle East and Africa (EMEA) ETF equity and commodity product management at Invesco, said Saudi Arabia is in the early stages of an exciting transformation.
Saudi Arabia’s government launched the Vision 2030 economic reform programme in 2016. Its primary objective is to reduce the economy’s dependency on government funding and oil exports.
The programme is going to be partly funded by a 5% sale of state-owned oil giant Saudi Aramco. The initial product offering (IPO) is likely to be in 2019 and could raise up to $100 billion, making it by far the largest IPO in history.
The programme aims to encourage major domestic companies to expand across borders and into global markets, as well as attract foreign direct investment.
Additionally, the programme hopes to increase the contribution of private sector consumption to gross domestic products, the number of Saudis working in the private sector and the use of solar and other renewable energy sources.
Pietro Poletto, head of fixed income and listed products at London Stock Exchange Group said the new ETF is the first of its kind in Europe and demonstrates the dynamic growth of the industry, as well as 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,’ he said.