Arab News, Wednesday, May 16, 2018 | Shaaban 30, 1439
UAE firm plans Abu Dhabi-listed ETF to play Saudi equities boom
A United Arab Emirates financial firm plans
to create an exchange-traded fund focused on Saudi Arabian equities and list it
on the Abu Dhabi Securities Exchange, tapping into surging regional demand for
Only a few exchange-traded fund (ETFs), which track indexes, are listed in the
Gulf, and the planned product is believed to be the first cross-border ETF
listed in the region and focused solely on Saudi Arabia, fund managers said.
ADS Investment Solutions, a subsidiary of ADS Securities, aims to list the ETF
as soon as in the next few weeks, depending on regulatory approvals, Ryan
Lemand, senior executive officer at ADS Investment, said on Tuesday.
“We see value in investing in Saudi with a passively managed, systematic
strategy, with minimal fees and minimizing costs. An ETF is the best instrument
for this,” Lemand told Reuters.
Foreign investors have bought a net $2.7 billion of Saudi stocks so far this
year, making Riyadh one of the hottest markets outside the developed world, and
fund managers believe tens of billions of dollars may enter in the next two
In March, index compiler FTSE Russell decided to add Saudi Arabia to its
emerging market index starting in March 2019, and MSCI will decide whether to
take the same action next month.
ADS Investment’s ETF will track a new Saudi equities index developed with FTSE
Russell. The index has been designed to minimize volatility and prevent
excessive exposure to any particular stock or sector, FTSE Russell said in a
Lemand said the design would help the fund cope with the upcoming listing in
Riyadh of oil giant Saudi Aramco, which is expected to raise tens of billions of
dollars in the world’s largest initial public offer of shares.
Many investors are concerned that because of Aramco’s huge size, its listing
could balance the market too heavily toward the oil sector, making the Saudi
bourse essentially a bet on volatile oil prices. The new index will impose a cap
on Aramco’s weighting, Lemand said.
The ETF will buy Saudi stocks through a qualified foreign institution licensed
to invest directly in the Riyadh bourse. Lemand did not name the institution. He
said initial capital for the fund had been allocated and it would start a
marketing campaign in coming weeks, but declined to predict the size of the