Saudi Arabia’s Growing ETF Market
Saudi Arabia is increasingly leveraging exchange-traded funds (ETFs) to bolster its capital markets. The Public Investment Fund (PIF) has invested $200 million in a new ETF by State Street Global Advisors, marking the first Saudi bond ETF listed in Europe or the US. This fund offers exposure to both US dollar-denominated Saudi bonds and local currency Sukuk bonds.
The PIF’s strategy aligns with Saudi Arabia’s Vision 2030, which aims to diversify its economy beyond oil. While bond ETFs are new for international investors, Saudi equity ETFs have been available for years, with significant investments from the PIF in various regions, including a $100 million stake in a Japanese ETF and involvement in the first Asia-Pacific Saudi ETF.
Saudi Arabia is also expanding its investment reach by including ETFs in its portfolio strategy. A Saudi-listed ETF focusing on Hong Kong companies launched recently, while two China-listed ETFs support the Hong Kong vehicle.
According to Emmanuel Laurina of SSGA, the Saudi bond ETF targets a broad range of investors and offers a cost-effective option with a 0.37% expense ratio. The fund provides diversified access to local bonds, catering to global investors interested in Saudi Arabia’s maturing bond market.
Despite the positive outlook, challenges remain. An HSBC report highlights Saudi Arabia’s success in diversifying its economy, yet foreign investment goals have not been fully met. Kenneth Lamont of Morningstar points out that the success of Saudi debt ETFs will depend on their investment appeal.
Yazeed Al-Humied from PIF emphasizes the role of ETFs in deepening Saudi markets and attracting European investors. This strategic move aims to strengthen international investment ties and support the kingdom’s economic diversification.