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This article identifies and analyzes the best Saudi Arabia ETFs listed on U.S. stock exchanges.
Best Saudi Arabia ETFs: Background
Saudi Arabia’s benchmark index is trading at 15-year highs as the Kingdom’s financial infrastructure expands and global demand for oil surges.
Saudi Arabia is the world’s second-largest producer of oil. The state-owned Saudi Aramco Co. generated a staggering $30.4 billion in net income during the third quarter of 2021.
Prior to 2015, it was impossible for your investment portfolio to directly benefit from the Saudi Arabian region as outside, public capital was not welcomed.
Today, you can invest in the Saudi Arabian stock market through a U.S.-listed Saudi Arabia ETF.
Best Saudi Arabia ETFs
#1. iShares MSCI Saudi Arabia ETF (KSA)
- 1-Year Performance: +43.56%
- Expense Ratio: 0.74%
- Annual Dividend Yield: 1.05%
- AUM: $1.1 billion
- 3 Month Avg. Volume: 393,605
- Number of Holdings: 88
- Inception Date: 2015
The iShares MSCI Saudi Arabia ETF provides access to the Saudi Arabian stock market.
Historically, the Saudi Arabian stock market was closed to foreign investors. But that was before KSA.
This is the first (and kind of the last) U.S.-listed fund that provides exposure to the most valuable and important companies in Saudi Arabia, and only Saudi Arabia.
There are several emerging market ETFs that include small weightings to Saudi-based companies, but 100% of the assets in KSA are invested in the region.
Financials and Materials are the top sectors in the fund, accounting for a combined 70% of KSA.
You will notice the words “bank”, “industries”, “oil”, “mining”, or “nutrients” in the names of KSA’s core holdings.
Speaking of, here are the top 10 holdings in KSA:
- Al Rajhi Bank (1120:SAU) 15.02%
- Saudi National Bank (1180:SAU) 13.04%
- Saudi Basic Industries (2010:SAU) 9.04%
- Saudi Telecom (7010:SAU) 4.45%
- Saudi Arabian Oil Company (Saudi Aramco) (2222:SAU) 4.33%
- Riyad Bank (1010:SAU) 4.06%
- Saudi Arabian Mining Co. (1211:SAU) 3.60%
- Saudi British Bank (1060:SAU) 3.02%
- SABIC Agri-Nutrients Co. (2020:SAU) 2.83%
- Banque Saudi Fransi (1050:SAU) 2.75%
These are primarilylarge-cap stockswith market caps well over $12 billion.
Around 65% of KSA’s assets are invested in large-cap companies.
KSA Top Holdings Analysis
KSA’s top five holdings account for nearly half of the ETF, so it’s worth analyzing a few of them individually.
KSA’s top holding, the Al Rajhi Bank (1120:SAU), is the world’s largest Islamic bank by capital and one of the top 15 largest banks in the world. It is a major investor in Saudi Arabia’s economy, while also providing key financial infrastructure to support the Kingdom.
It has a vast network of over 526 branches, more than 4,900 ATM’s, and 290,302 point-of-sale terminals installed around Saudi Arabia. Additionally, it operates 215 remittance centers across the Kingdom.
KSA’s second largest holding is another financial institution, the Saudi National Bank (1180:SAU), which provides similar services as the Al Rajhi Bank.
These two institutions have a combined $700B in market capitalization.
Perhaps the most well-known Saudi Arabian company, Saudi Aramco (2222:SAU), is the fifth largest holding in the fund and one of the largest companies by market cap in the world.
In 2019, the Saudi Arabian government took Saudi Aramco public, but only put up 1.5% of its available shares in the raise.
This allowed public capital to flow in while maintaining firm control over the company.
Ok, now let’s analyze your other option when it comes to Saudi Arabia ETFs.
#2. Franklin FTSE Saudi Arabia ETF (FLSA)
- 1-Year Performance: +44.48%
- Expense Ratio: 0.39%
- Annual Dividend Yield: 1.42%
- AUM: $3.8 million
- 3 Month Avg. Volume: 363
- Number of Holdings: 54
- Inception Date: 2018
The Franklin FTSE Saudi Arabia ETF provides access to the Saudi Arabian stock market, “allowing investors to gain exposure to this newly accessible market at a low cost”.
FLSA launched three years after KSA and is the only other U.S.-listed ETF that is 100% invested in the Saudi Arabian stock market.
However, it has struggled to catch up to KSA.
The Franklin FTSE Saudi Arabia ETF has just $3 million in total net assets, and does just 363 in daily trading volume.
The two funds have a similar basket of core holdings, dividend yield, and 1-year trailing performance, but differ greatly in size and liquidity.
FLSA’s selling point is its lower-cost expense ratio, charging 0.39% versus 0.74% from KSA, but the trade-offs in liquidity do not appear to be worth the savings in fees, at least in our estimation.
FLSA Top Holdings:
- Al Rajhi Bank (1120:SAU) 15.02%
- Saudi National Bank (1180:SAU) 13.04%
- Saudi Arabian Oil Company (Saudi Aramco) (2222:SAU) 4.33%
- Saudi Basic Industries (2010:SAU) 9.04%
- Saudi Telecom (7010:SAU) 4.45%
- Riyad Bank (1010:SAU) 4.06%
- Saudi Arabian Mining Co. (1211:SAU) 3.60%
- SABIC Agri-Nutrients Co. (2020:SAU) 2.83%
- Saudi British Bank (1060:SAU) 3.02%
- Banque Saudi Fransi (1050:SAU) 2.88%
Other ETFs with Exposure to Saudi Arabia
As previously mentioned, there are a few emerging market funds that provide some exposure to the Saudi Arabian stock market.
Your best options, with their corresponding allocations to Saudi Arabia, are listed below:
- Global X MSCI Next Emerging & Frontier ETF (EMFM) 10.60%
- First Trust International Equity Opportunities ETF (FPXI) 10.06%
- Invesco S&P Emerging Markets Low Volatility ETF (EELV) 9.18%
- iShares MSCI Emerging Markets Min Vol Factor ETF (EEMV) 6.84%
These ETFs provide broad exposure to frontier and emerging markets, but do not express a single-country view on Saudi Arabia.
Alternatives to Saudi Arabia ETFs
Finding the right alternative to a Saudi Arabia ETF depends on why you want to invest in the region in the first place.
Are you looking to diversify your portfolio geographically? An ex U.S. fund like the Vanguard FTSE All-World ex-US ETF (VEU) may suffice.
Are you bullish on oil? Then consider a commodity ETF like the United States Oil Fund (USO) or a BlackRock equity fund like the iShares U.S. Oil & Gas Exploration & Production ETF (IEO).
Do you want exposure to Saudi Aramco stock? Then you really don’t have an alternative. KSA and FLSA are your most direct-exposure options.
Saudi Arabia ETFs: Frequently Asked Questions
What is a Saudi Arabia ETF?
A Saudi Arabia ETF is an exchange-traded fund that invests in equities on the Saudi Arabian stock market. There are two U.S.-listed Saudi Arabia funds that trade on the New York Stock Exchange: the iShares MSCI Saudi Arabia ETF (KSA) and the Franklin FTSE Saudi Arabia ETF (FLSA). These Saudi Arabia ETFs enable investors from all over the world to invest in the historically inaccessible Saudi Arabian stock market.
What is the best performing Saudi Arabian ETF?
The best performing Saudi Arabian ETF is the iShares MSCI Saudi Arabia ETF (KSA). The fund is up more than 40% in the trailing 12-month period, a time when many equity markets experienced significant sell-offs.
Is Saudi Arabia a good place to invest?
Saudi Arabia is an energy superpower. It has the second most valuable natural resources in the world (worth $34.4 trillion), and is the largest exporter of petroleum in the world. Saudi Arabia is a good place to invest if you’re seeking portfolio exposure to resource-rich regions.
Bottom Line: Saudi Arabia ETFs
Hopefully, you’re now aware of the best Saudi Arabia ETFs and other alternative investments to them.
This article is for informational purposes only, and it is not intended to be investment advice. Read our editorial guidelines and public equities research methodology to learn more about how we selected the best Saudi Arabia ETFs.
