Franklin Templeton plans Saudi Arabia ETF

Franklin Templeton is seeking approval for a Saudi Arabia ETF (exchange-traded fund) according to a filing with the Securities and Exchange Commission (SEC).

The global fund management company plans come after Saudi Arabia’s addition to indexer MSCI’s group of emerging markets.

Saudi Arabia’s listing in the MSCI EMI could attract $90 billion investments in the Saudi market, $40bn on the back of the actual listing in the MSCI EMI, and $50bn following the initial public offering (IPO) of Saudi Aramco, Bassel Khatoun, director of portfolio management at Franklin Templeton, said in a statement.

Signs of the recent interest for Saudi Arabia was demonstrated last week when foreign investors jumped at Invesco’s first European ETF that would track the country’s shares in antecipation of MSCI upgrade.

Currently, there’s only one ETF fund in the country, the iShares MSCI Saudi Arabia ETF (KSA). It has $269 million in assets, a figure that has skyrocketed 1,700% this year, the most among all single-country funds.

Franklin Templeton’s filing with the american regulator was not clear on how this fund will differentiate itself from KSA or what it will charge investors. The iShares MSCI Saudi Arabia ETF comes with an expense ratio of 0.74%.

However, the company has been applying a strategy of being cheaper than rivals. Franklin charges less than $1 for every $1,000 invested in its developed single-country ETFs and $1.90 for emerging market funds, while BlackRock charges at least $4.80 for developed markets ETFs and $6.20 for emerging market funds.

The banking and healthcare sectors are first in line to attract the billions of dollars in foreign investment that the country’s upgrade in the MSCI will bring. As part of its Saudi Vision 2030 plan to diversify the economy, the government is increasing healthcare expenditure by 10% to a total of 35% by 2020.

Pedro Gonçalves
Pedro Gonçalves is Financial Correspondent at International Investment.

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