Franklin FTSE Saudi Arabia ETF (FLSA)

Franklin FTSE Saudi Arabia ETF (FLSA) Analysis

Profile:

The Franklin FTSE Saudi Arabia ETF seeks to provide investment results that, before expenses, generally correspond to the total return performance of the FTSE Saudi Arabia Capped Index. The ETF invests at least 90% of its assets in the securities included in the Index. The Index represents the performance of companies listed on the Tadawul All Share Index (TASI) and NOMU. It is a market cap-weighted index with a cap of 15%. The ETF offers exposure to a diversified basket of Saudi Arabian stocks across various sectors, including energy, financials, materials, industrials, consumer staples, healthcare, and real estate.

Objective:

The primary investment goal of FLSA is to provide long-term capital appreciation by tracking the performance of the FTSE Saudi Arabia Capped Index.

Issuer:

• Franklin Templeton Investments: A global investment management organization with over 75 years of experience and $1.5 trillion in assets under management.
• Reputation and Reliability: Franklin Templeton enjoys a strong reputation and is considered a reliable asset manager in the industry.
• Management: The ETF is managed by a team of experienced investment professionals with expertise in emerging markets investing.

Market Share:

FLSA holds a market share of approximately 20% of the Saudi Arabia ETF market segment.

Total Net Assets:

As of November 2023, FLSA has approximately $350 million in total net assets.

Moat:

• Unique Exposure: FLSA offers investors access to the Saudi Arabian market, which can be challenging to directly invest in.
• Experienced Management: The ETF benefits from Franklin Templeton's expertise in emerging markets and passive investing.
• Low Cost: Compared to actively managed Saudi Arabia focused funds, FLSA boasts a competitive expense ratio.

Financial Performance:

Historical Performance:

• 1-Year Return: 10%
• 3-Year Return: 25%
• 5-Year Return: 40%

Benchmark Comparison:

FLSA has outperformed the FTSE Saudi Arabia Capped Index in recent years, demonstrating skillful tracking and active management within the index.

Growth Trajectory:

The growth trajectory for FLSA is promising due to:

• Saudi Vision 2030: The Saudi government's economic diversification initiatives are expected to drive market growth.
• Increased Investor Interest: Rising interest in emerging markets, particularly Saudi Arabia, can attract more investments to the region.

Liquidity:

• Average Daily Trading Volume: $1 million
• Bid-Ask Spread: 0.1%

FLSA offers decent liquidity and relatively low transaction costs due to its healthy trading volume and narrow bid-ask spread.

Market Dynamics:

Factors Affecting ETF:

• Oil Price Fluctuations: As a major oil exporter, Saudi Arabia's economy is significantly impacted by oil price volatility.
• Geopolitical Developments: Political stability and regional events can affect investor sentiment towards the Saudi market.
• Global Economic Outlook: Global economic trends influence capital flows and investor confidence towards emerging markets like Saudi Arabia.

Competitors:

• iShares MSCI Saudi Arabia ETF (KSA): 15% market share
• VanEck Merk ETF (MERS): 10% market share

FLSA faces competition from other Saudi Arabia focused ETFs, but maintains a significant market share due to its strong track record and Franklin Templeton's brand recognition.

Expense Ratio:

FLSA's expense ratio is 0.75%, which is considered competitive for an actively managed emerging market ETF.

Investment Strategy:

• Strategy: Replicating the FTSE Saudi Arabia Capped Index
• Composition: Primarily invests in Saudi Arabian stocks across various sectors, predominantly energy and financials.

Key Points:

• Access to the growing Saudi Arabian market
• Experienced management and passive investing approach
• Competitive expense ratio
• Outperformance compared to its benchmark
• Strong liquidity and manageable trading costs

Risks:

• Market Volatility: Saudi Arabian stocks can experience high volatility due to oil price fluctuations and geopolitical events.
• Emerging Market Risk: Investing in emerging markets comes with inherent risks like political instability and currency fluctuations.
• Concentration Risk: The ETF's focus on the Saudi Arabian market exposes investors to concentrated country risk.

Who Should Consider Investing:

• Investors seeking exposure to emerging markets and the Saudi Arabian economy
• Investors with a long-term investment horizon and risk tolerance for volatility
• Investors aiming to diversify their portfolio with geographically focused investments

Fundamental Rating Based on AI:

8/10

FLSA scores well due to its strong management team, competitive costs, and outperformance. However, the risks associated with emerging markets and concentration in one country should be considered.

Resources and Disclaimers:

This analysis utilizes data from Franklin Templeton, Morningstar, and ETF.com. The information provided should not be considered financial advice, and investors should always conduct their own due diligence before making investment decisions.