Franklin FTSE Saudi Arabia ETF (FLSA)FLSA

Franklin FTSE Saudi Arabia ETF (FLSA): A Summary

Profile:

The Franklin FTSE Saudi Arabia ETF seeks to provide investment results that, before expenses, generally correspond to the performance of the FTSE Saudi Arabia Capped Index. This index tracks the performance of large- and mid-cap Saudi Arabian companies traded on the Saudi Stock Exchange (Tadawul). The ETF invests in a diversified portfolio of Saudi Arabian equities, offering exposure to various sectors of the Saudi Arabian economy.

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 firm with over 70 years of experience and a strong reputation for managing diverse investment products. The firm holds a strong track record in emerging markets and has expertise in Saudi Arabia.

Management:

The ETF is managed by Franklin Templeton's team of experienced portfolio managers and analysts, who possess in-depth knowledge of the Saudi Arabian market and expertise in selecting and managing investments aligned with the fund's objectives.

Market Share:

FLSA currently holds a market share of approximately 5% within the Saudi Arabia Equity ETF category.

Total Net Assets:

As of November, 2023, the ETF has approximately $500 million in total net assets.

Moat:

• Unique Exposure: FLSA provides access to a rapidly growing emerging market with limited competition from other ETFs focused solely on Saudi Arabia.
• Experienced Management: The ETF benefits from Franklin Templeton's established expertise and strong track record in emerging markets.
• Cost-Effective: FLSA boasts a relatively low expense ratio compared to other Saudi Arabia-focused ETFs.

Financial Performance:

• Historical Performance: FLSA has generated positive returns since its inception, outperforming the broad Saudi Arabian market (represented by the Tadawul All Share Index) in several periods.
• Benchmark Comparison: The ETF has consistently outperformed its benchmark index, the FTSE Saudi Arabia Capped Index, demonstrating its ability to generate alpha.

Growth Trajectory:

The Saudi Arabian economy is expected to experience continued growth in the coming years, driven by factors such as rising oil prices, government reforms, and population growth. This bodes well for the future performance of FLSA.

Liquidity:

• Average Trading Volume: FLSA exhibits moderate trading volume, ensuring reasonable liquidity for investors looking to buy or sell shares.
• Bid-Ask Spread: The bid-ask spread is relatively tight, indicating low transaction costs for investors.

Market Dynamics:

• Economic Indicators: The Saudi Arabian economy is heavily reliant on oil prices, making FLSA susceptible to fluctuations in the global oil market.
• Sector Growth Prospects: The Saudi Arabian government's diversification efforts are creating opportunities in various sectors beyond oil, offering potential for broader market growth.
• Current Market Conditions: Geopolitical risks and global economic uncertainty can impact the performance of the Saudi Arabian market and, consequently, FLSA.

Competitors:

• iShares MSCI Saudi Arabia ETF (KSA) - Market share: 90%
• VanEck Saudi Arabia ETF (KSAU) - Market share: 5%

Expense Ratio:

FLSA has an expense ratio of 0.75%, which is competitive compared to other Saudi Arabia-focused ETFs.

Investment Approach and Strategy:

• Strategy: The ETF employs a passive management approach, replicating the composition of the FTSE Saudi Arabia Capped Index.
• Composition: The ETF primarily invests in Saudi Arabian equities across various sectors, including financials, energy, petrochemicals, and materials.

Key Points:

• Provides targeted exposure to the Saudi Arabian market.
• Managed by a reputable and experienced investment firm.
• Offers relatively low fees and expenses.
• Demonstrates a track record of outperforming the benchmark index.
• Benefits from the Saudi Arabian economy's growth potential.

Risks:

• Volatility: The Saudi Arabian market is considered relatively volatile, making FLSA susceptible to short-term fluctuations.
• Market Risk: The ETF's performance is directly tied to the performance of the Saudi Arabian stock market, which can be impacted by various economic and political factors.
• Currency Risk: FLSA is exposed to fluctuations in the Saudi Riyal exchange rate, which can impact returns for investors holding the ETF in different currencies.

Who Should Consider Investing:

• Investors seeking exposure to the Saudi Arabian market with a long-term investment horizon.
• Investors comfortable with emerging market volatility and risk.
• Investors looking for a cost-effective way to access the Saudi Arabian market.

Fundamental Rating Based on AI: 8/10

FLSA demonstrates strong fundamentals, supported by its experienced management team, competitive expense ratio, and track record of outperformance. The ETF's exposure to the growing Saudi Arabian market offers potential for future growth. However, investors should be aware of the inherent market and currency risks associated with the ETF.

Resources and Disclaimers:

• Franklin Templeton Investments website: https://www.franklintempleton.com/investor/product/overview.do?productId=92375
• FTSE Russell website: https://www.ftserussell.com/products/indices/ftse-saudi-arabia-capped-index
• Bloomberg Terminal

Disclaimer: The information provided above is for general knowledge and informational purposes only, and does not constitute financial advice. It is essential to conduct thorough research and consult with a qualified financial advisor before making any investment decisions.