Invesco has launched a Saudi Arabia ETF denominated in dollars and listed on the London Stock Exchange.
The Invesco MSCI Saudi Arabia Ucits ETF launch reflects ongoing early stage transformation in the kingdom, including reforms intended to be put in place by the Saudi Vision 2030 programme – to reduce the country’s dependency on government expenditure and hydrocarbon exports, notes Chris Mellor, head of Emea ETF Equity and Commodity Product Management.
“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.”
The programme is to be part funded by the much discussed sale of 5% of shares in Saudi Aramco via an IPO that could raise up to $100bn. The London Stock Exchange has recently introduced a new subset of listing rules that would facilitate the listing of Saudi Aramco, should the Saudi government choose to list it primarily on that exchange.
Saudi Arabia’s domestic equity market have been open to foreign investors since 2015, with ongoing work to bring global standards to areas such as settlement. MSCI is expected to decide by 20 June whether it will raise Saudi Arabia to emerging market status for indexing purposes. If the change is confirmed, then it will be included in the MSCI Emerging Markets index from 2019, with an estimated weight of 2.3%, Invesco said.
The ETF being listed on the LSE will track the performance of the MSCI Saudi Arabia 20/35 index, which is applied in a way to ensure the ETF meets Ucits requirements for diversification and avoiding overconcentration in sectors, Invesco added. The index consists of 22 large cap and mid cap stocks, that together account for about 85% of the free float market capitalisation in Saudi Arabia.