Deutsche AWM launches Europe’s first ETF providing exposure to Saudi Arabia

Feb 24th, 2015 | By | Category: Equities

Deutsche Asset & Wealth Management (Deutsche AWM) has listed Europe’s first exchange-traded fund to provide equity exposure to Middle Eastern Gulf States including Saudi Arabia.

Deutsche AWM launches Europe’s first ETF providing exposure to Saudi Arabia

Deutsche AWM has launched the first European listed ETF to provide significant exposure to Saudi Arabia. (Photo © BroadArrow)

The db x-trackers MSCI GCC Select Index UCITS ETF tracks the equity markets of all the Gulf Cooperation Council (GCC) countries, with a 65% weighting to Saudi Arabia. The other countries in the GCC are Bahrain, Qatar, Kuwait, Oman and the United Arab Emirates.

Manooj Mistry, Deutsche AWM’s head of exchange-traded products, EMEA, said: “The Saudi Arabian stock market has traditionally been difficult for foreign investors to access, so the launch of an index tracker providing exchange-traded exposure to all the GCC countries is a significant step forward.”

The ETF tracks the MSCI GCC Countries ex Select Securities Index, which is based on the MSCI GCC Countries Index but with the exclusion of a small number of stocks due to restrictions on foreign ownership. The underlying index is market capitalization-weighted and currently consists of 82 securities, incorporating large and mid-cap stocks.

The financials sector commands the largest weight, with 51.4% as of 30 January 2015, followed by materials with 21.7% and telecommunication services with 9.4%. Perhaps surprisingly, energy is the smallest sector with just 1.9%.

The new fund, with its focus on the rich oil-endowed GCC states, is an exciting addition to Deutsche AWM’s comprehensive suite of over 60 emerging market and frontier market ETFs, offering a range of equity and fixed income exposures. The suite is designed to provide investors with a high level of granularity, allowing for the targeting of specific countries, regions and sectors.

According to the International Monetary Fund’s latest Regional Economic Outlook for the Middle East and Central Asia, oil exporting nations have been put under pressure by the recent slump in the oil price; however, the organisation estimates that capital reserves held by GCC states are sufficiently high to avoid steep spending cuts and limit the drag on growth.

The GCC states are an important trading partner for the European Union, accounting for approximately four per cent of total European Union exports to non-member countries, while the GCC region also benefits from increasing trade with China and India, and high energy demand from Asia.

Prior to now, European ETF investors have only been able to access GCC countries excluding Saudi Arabia via the iShares MSCI GCC ex-Saudi Arabia UCITS ETF. This London Stock Exchange and Deutsche Börse-listed ETF, which debuted in 2009, tracks the MSCI GCC Countries ex Saudi Arabia Index, which only includes stocks listed in the United Arab Emirates, Kuwait, Qatar, Bahrain and Oman.

The new Deutsche AWM ETF has a total expense ratio of 0.65% and been listed on the Deutsche Börse. It is expected to cross-list on other major European exchanges, including the LSE, in due course.

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