State Street Global Advisors (SSGA) has launched a new fixed income ETF in Europe, marking the first fund on the continent to exclusively target bonds issued by Saudi Arabia’s government and quasi-government entities.
Saudi Arabia represents the second-largest bond market among GCC countries.
The SPDR JP Morgan Saudi Arabia Aggregate Bond UCITS ETF is listed on Xetra in euros (Ticker: KSAB GY) and on the London Stock Exchange in US dollars (KSAB LN).
The ETF debuted with $250 million in assets and has an expense ratio of 0.37%.
The launch comes amid a surge in the Gulf Cooperation Council (GCC) bond market, where total outstanding debt has more than tripled since 2019, reaching nearly $1.35 trillion as of September 2024.
While the United Arab Emirates holds the largest bond market in the region, Saudi Arabia is a close second, having rapidly expanded its bond issuance in recent years with a focus on US dollar-denominated sovereign and corporate bonds.
As the world’s largest oil exporter, Saudi Arabia is central to global energy markets, but it is also pursuing economic diversification under its Vision 2030 program. This initiative aims to reduce reliance on oil by attracting foreign investment and expanding key industries such as technology, finance, and renewable energy.
Emmanuel Laurina, Head of Middle East, Africa and Official Institutions, State Street Global Advisors, commented: “We are pleased to offer investors cost-effective access to the fast-growing fixed income market in Saudi Arabia, one of the leading issuers of investment-grade international bonds among emerging markets. As the Kingdom continues to diversify its economy through energy transition, infrastructure, and other growth initiatives, we believe there are appealing investment themes for international investors to capture through a diversified exposure to Saudi bonds.”
Methodology
The ETF tracks the JP Morgan Saudi Arabia Aggregate Index, jointly developed by JP Morgan and SSGA, which includes US dollar-denominated and Saudi riyal-denominated government and quasi-government bonds, including Sukuk bonds. Sukuks adhere to Islamic finance principles prohibiting interest, offering holders a share in the revenues of underlying assets rather than fixed interest payments.
Eligible bonds for the index include fixed, floating, and zero-coupon instruments, provided they meet minimum size thresholds of $500 million for USD bonds and $1 billion for SAR bonds. Bonds must also have a remaining maturity of over 2.5 years.
The index uses market value weighting and is reconstituted and rebalanced monthly.