Saudi Arabia’s diplomatic scuffle with Canada risks alienating the kingdom in a time when it is trying to revamp its economy, shaking the outlook for the emerging country-related exchange traded fund

The iShares MSCI Saudi Arabia Capped ETF (NYSEArca: KSA) has been among the better performing emerging markets this year, rising 19.4% year-to-date.

However, the developing market’s outlook may come under pressure as Saudi Arabia’s diplomatic problems with Canada dissuades foreign investors from investing money into the emerging country’s bid to overhaul its economy.

Saudi Arabia declared Canada’s ambassador, Dennis Horak, persona non grata and expelled him after Canada’s Foreign Ministry censured Saudi Arabia for arresting human rights activists, reports Margherita Stancati for the Wall Street Journal.

Saudi Foreign Ministry announced it “will put on hold all new business and investment transactions with Canada” after what it described as an unacceptable attempt by Canada to interfere in domestic affairs.

The immediate strike back with economic consequences may potential dissuade other foreign investors looking into Saudi Arabia.

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