Invesco’s Saudi Arabia ETF surpasses $300m AUM

Mar 4th, 2019 | By | Category: Equities

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Invesco has announced that the Invesco MSCI Saudi Arabia UCITS ETF (MSAU LN) has grown to $315 million in assets under management, just eight months since its launch.

Invesco Saudi Arabia ETF

The fund provides exposure to 30 large- and mid-cap stocks listed in Saudi Arabia.

The ETF, which tracks the MSCI Saudi Arabia 20/35 Index through the use of swaps, is now the largest ETF in the world providing exposure to the Persian Gulf state.

The underlying MSCI index comprises 30 large- and mid-cap stocks, accounting for approximately 85% of the free float market capitalization in Saudi Arabia.

The index contains various constraints to ensure it meets UCITS requirements for diversification. The weight of the largest constituent is capped at 35%, and the weight of any other single entity is limited to 20%.

According to Invesco, the strong demand for the fund reflects government efforts in recent years to boost the appeal of the country as an investment destination.

The reforms within the ‘Saudi Vision 2030’ programme have several objectives, including reducing the economy’s dependency on government funding and oil exports; increasing the contribution of private sector consumption to GDP; boosting the number of Saudis working in the private sector, and promoting the use of solar and other renewable energy sources.

The programme also seeks to encourage major domestic companies to expand across borders and into global markets.

Gary Buxton, Head of EMEA ETFs at Invesco, commented, “We have seen strong client demand for this ETF mainly because Saudi Arabia is undertaking a series of major reforms intended to improve growth, diversify away from hydrocarbons, and make the country into an epicentre for global trade.”

Since opening its equity markets to foreign investors in 2015, Saudi Arabia has eased foreign investor requirements significantly and brought trade settlement more in line with global standards.

As a result, MSCI announced in June 2018 that it would be adding Saudi Arabia to the MSCI Emerging Markets Index in a two-step process between May and August 2019, with an estimated final weighting of around 2.8%.

With $1.8 trillion tracking the popular EM index, Invesco notes this equates to a potential inflow of more than $50 billion as investors respond to the changes.

The positive effect on Saudi Arabia’s equity markets may already be underway – it recorded one of the best performances globally last year, and has gained almost 10% since the index inclusion announcement. In contrast, the MSCI Emerging Markets Index declined 3.3% over the same period.

The ETF is available to trade in US dollars on the London Stock Exchange. It charges a 0.50% management fee as well as a 0.20% swap fee.

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