Oil-rich Saudi Arabia is one of the largest Middle East economies, but it is not represented in the exchange traded fund space. However, seeking to fill the gap, Van Eck Global has filed with the Securities and Exchange Commission to market two country-specific funds focused on Saudi Arabia’s markets.
According to the filing, the Market Vectors Saudi Arabia ETF is a passively indexed fund that will hold assets in securities of Saudi Arabian companies, which are domiciled and listed in Saudi Arabia with at least 50% of its revenue in Saudi Arabia. The ETF will follow a market-cap weighted methodology.
According to another filing, the Market Vectors Saudi Arabia Small-Cap ETF will follow Saudi Arabian small-capitalization companies, which include the bottom 90% to 98% of the full free-float market capitalization.
No ticker symbols or expense ratios have been revealed in the filings.
It should be noted that Saudi Arabia is considered a developing economy, which are associated with higher volatility and risks, compared to developed markets.
“Securities markets in Saudi Arabia are subject to greater risks associated with market volatility, lower market capitalization, lower trading volume, illiquidity, inflation, greater price fluctuations, uncertainty regarding the existence of trading markets, governmental control and heavy regulation of labor and industry,” according to the filings.
Additionally, the funds are subject to currency risks – assets are denominated in the Saudi riyal. As a result, changes in the Forex market may either benefit or drag on the funds’ performances.
For more information on the Middle East, visit our Middle East category.
Max Chen contributed to this article.