HSBC GAM undercuts rivals with Saudi Arabia ETF launch

Saudi Arabia ETF

HSBC Global Asset Management has followed Invesco and BlackRock in launching a Saudi Arabia ETF following the MSCI’s decision to include the country in its wider emerging market benchmarks.

The HSBC MSCI Saudi Arabia 20/35 Capped UCITS ETF (HMSP) will list on the London Stock Exchange with an ongoing charges figure (OCF) of 0.50%.

This makes HMSP the cheapest pure play Saudi Arabia ETF on the market. BlackRock’s IKSA charges 0.60% and Invesco’s MSAU has a management fee of 0.50% and a swap fee of 0.20%.

Like IKSA, which ETF Stream revealed launched earlier this month, HMSP is physically replicated while MSAU is synthetically-backed.

Tracking the MSCI Saudi Arabia 20/35 Capped index, the ETF offers exposure to 85% of the free float adjusted market cap of Saudi Arabia stocks through the Qualified Foreign Investor (QFI) programme.

The index caps the top holding at 35% and all other group securities at 20%, with a buffer of 10% applied on these limits at each index rebalancing.

The launch follows MSCI’s decision to include the country across major emerging market indices last June.

The index provider will make the changes in a two-step process beginning this June, 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.

Olga De Tapia, head of EMEA ETFs sales at HSBC GAM, commented: “Saudi Arabia is a market that is increasingly relevant to global investors as it makes further progress in its evolution to becoming an international capital markets hub.”

Carmen Gonzalez-Calatayud, director and senior product specialist, ETFs, at HSBC GAM, added: “The launch is a direct response to increased demand from investors. Our goal, therefore, has been to ensure that the solution we develop is fit for purpose and efficient to implement.”

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