BlackRock launches Saudi Arabia ETF in preparation for MSCI inclusion

BlackRock launches Saudi Arabia ETF

BlackRock has expanded its emerging markets range with the launch of a Saudi Arabia ETF as it looks to take advantage of the country’s inclusion into MSCI benchmarks in May.

The iShares MSCI Saudi Arabia Capped UCITS ETF (IKSA) is listed on the London Stock Exchange with a total expense ratio (TER) of 0.60%.

Tracking the MSCI Saudi Arabia 20/35 index, IKSA offers investors exposure to 30 securities that cover around 85% of the country’s free float-adjusted market cap.

The weight of the largest stock is capped at 35% while all other stocks are constrained to a maximum of 20%. Overall, the Saudi index will make up approximately 2.66% of the MSCI Emerging Markets index after full inclusion this year.

Brett Pybus, head of iShares EMEA investment and product strategy at BlackRock, commented: “We have launched this product in preparation for MSCI’s inclusion at the end of May. IKSA will provide exposure to investors to a market which, historically, has a number of challenges around access.

“MSCI’s decision to include Saudi Arabia in its emerging market benchmarks has crept up on investors. There is less focus on this event compared to China.”

The index provider, who revealed plans to include the country across major emerging market indices last June, will make the changes in a two-step process, making Saudi Arabia the eight-largest country in the flagship index, which tracks around $1.9trn in assets.

It is expected Saudi Arabia’s $536bn stock market could see around $20bn inflows from passive products following its inclusion across major indices.

This is the second pure-play Saudi Arabia ETF to be listed in Europe after Invesco launched MSAU last June.

The major difference between the two ETFs is IKSA is physically replicated while MSAU is synthetic with a management fee of 0.50% and a swap fee of 0.20%.

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