KSA ETF

iShares MSCI Saudi Arabia ETF has underperformed in 2024, lagging behind global equities, and we are not convinced this trend will reverse any time soon. Investors interested in Saudi equities also have the opportunity to look at FLSA, which we find more compelling. Saudi Arabia's economic outlook is pressured by declining oil prices, while Saudi banks, which dominate this portfolio, will have to deal with higher funding costs.

Saudi Arabia is launching an entrepreneurial ecosystem for non-oil industries, diversifying its economy away from energy. The iShares MSCI Saudi Arabia ETF provides retail investors with exposure to the Saudi market and its economic transformation. The top holdings of the KSA ETF include major financial institutions and Saudi Arabian Oil, reflecting the country's dominance in the financial and energy sectors.

The iShares MSCI Saudi Arabia ETF is an ETF that tracks the performance of the Saudi Arabian stock market. The ETF is heavily swayed by the financial exposures, which are benefiting structurally from the Vision 2030 plan underway in Saudi Arabia.

The iShares MSCI Saudi Arabia ETF offers global investors access to Saudi Arabia's equity market and its evolving economy. The drivers fueling the growth of Saudi Arabia's economy into 2024 and beyond are varied, demonstrating a comprehensive strategy aimed at strengthening and diversifying the economy. The valuation metrics of the ETF compared to those of a hypothetical U.S. ETF highlights potential undervaluation, making it an appealing investment option considering the market dynamics and growth opportunities.

The iShares MSCI Saudi Arabia ETF provides access to Saudi Arabian equities. Saudi Arabia's economy has some promising growth prospects built around its young population and diversification away from oil. However, the KSA ETF is heavily concentrated, with the top 10 holdings accounting for 56% of the portfolio and Financials accounting for 40% of the fund. With the KSA ETF trading at a 16.4x P/E, Saudi Arabian equities as represented by the KSA looks fairly priced.

iShares MSCI Saudi Arabia ETF is not as cost competitive as other alternatives in this space. Reduced crude production is likely to weigh heavily on the GDP landscape whilst non-oil metrics are slowing too. The lag effects of higher cost of funding are likely to put pressure on the NIM trajectory of Saudi banks which comprise 40% of the portfolio.

Saudi Arabia should outperform other emerging markets this decade. However, oil needs to remain above $80/barrel. Equities trade at a premium to MSCI Emerging Markets.