After a slew of launches in 2013 from Global X, including SuperDividend U.S. ETF (DIV) and MLP & Energy Infrastructure ETF (MLPX) among others, it appears as though the company is now setting its sights on the Middle East, and in particular Saudi Arabia, with a new fund filing.
This could be the first ETF from Global X to target the country. Though some key information, including expense ratio and holdings were not released, we have highlighted some of the main points below.
The Proposed Fund in Focus
As per a recent SEC filing, the proposed passively managed ETF will trade under the name of Global X MSCI Saudi Arabia ETF though the sponsor has not yet decided on the ticker symbol. The fund seeks to match the performance and yield of the MSCI Saudi Arabia Domestic Islamic 25/50 Index before fees and expenses.
This benchmark looks to give exposure to publicly traded companies that are domiciled and listed in Saudi Arabia, or those that generate at least 80% of their revenues from the nation.
The main market in the country is known as the Tadawul and currently consists of about 158 firms. Trading is done from Sunday to Thursday, leaving Friday and Saturday as off days for this market.
How Might this Fit in a Portfolio?
This ETF, if approved, would be the first fund to provide concentrated exposure to Saudi Arabia. The country is one of the biggest producers and exporters of oil in the world, and is a key player on both the regional and world economic stage.
Though the nation has a positive economic outlook based on various factors including GDP growth, fiscal balance and current account balance, there are some risks to investing in the economy.
The country is currently witnessing falling revenues from oil, which seems to be its biggest concern. This drop in oil revenues is impacting the country’s GDP growth.
Though the government is trying to diversify its sources of revenue, little has materialized so far. Hence, if the problem of falling oil revenues is not solved, there are risks that the current account surpluses might turn into deficit.