Saudi ETF outperforms emerging markets peers in 2018

An exchange-traded fund (ETF) tracking Saudi Arabian shares has delivered the biggest return among peers so far this year, Bloomberg reported on Tuesday.

The iShares MSCI Saudi Arabia ETF, or KSA, has returned 17 percent year-to-date, more than any other of the 229 ETFs focused on emerging-market equities tracked by Bloomberg, the news agency said.

KSA’s gain compares with an average loss of 6.6 percent for the group in the same period.

Qualified foreign investors were net buyers of Saudi shares in most weeks of the year on expectations that the country would earn emerging markets classification from major index compilers this year.

FTSE Russell announced the upgrade in March with implementation starting next year, and MSCI followed with its upgrade announcement in June.

Total assets of the KSA fund have increased almost 20 times to $271 million since December. The fund has Saudi Basic Industries Co. (SABIC), Al Rajhi Bank and National Commercial Bank (NCB) as its top holdings, the report said.

All of these are expected to be added to emerging markets indexes compiled by FTSE and MSCI.

As the interest in Saudi stocks rises, other investment firms have also launched similar products. Franklin Templeton Investments is seeking approval from the US regulators for a Saudi Arabia ETF, while Invesco Ltd. last month listed Europe’s first fund tracking the country’s shares.