iShares MSCI Saudi Arabia ETF (KSA)

ETF iShares MSCI Saudi Arabia ETF (KSA) Overview

Profile:

The iShares MSCI Saudi Arabia ETF (KSA) is a passively managed ETF that tracks the performance of the MSCI Saudi Arabia 25/50 Index. This index comprises 25 of the largest and most liquid Saudi Arabian companies, representing approximately 85% of the Saudi Arabian equity market. KSA primarily invests in large and mid-cap stocks across various sectors, including financials, energy, materials, and industrials.

Objective:

The primary objective of KSA is to provide investors with exposure to the Saudi Arabian equity market, allowing them to participate in the potential growth of the Saudi Arabian economy.

Issuer:

iShares is a leading global provider of exchange-traded funds (ETFs), owned by BlackRock, the world's largest asset manager.

Market Share:

KSA is the largest Saudi Arabia-focused ETF, with a market share of approximately 70% in its category.

Total Net Assets:

As of November 30, 2023, KSA has approximately $1.5 billion in assets under management.

Moat:

KSA's competitive advantages include:

• First-mover advantage: KSA is the oldest and most established Saudi Arabia-focused ETF, benefiting from brand recognition and investor trust.
• Large size and liquidity: KSA's large size and high trading volume translate to greater liquidity and lower trading costs for investors.
• Low expense ratio: KSA's expense ratio of 0.57% is lower than most competing ETFs, offering investors a cost-effective way to access the Saudi Arabian market.

Financial Performance:

KSA has historically delivered strong returns, exceeding the performance of its benchmark index and most competitors. In the past five years, KSA generated an average annual return of 12%, outperforming the MSCI Saudi Arabia 25/50 Index by 2%.

Growth Trajectory:

The Saudi Arabian economy is expected to grow steadily in the coming years, driven by factors such as increasing oil production, government reforms, and diversification efforts. This positive outlook suggests potential for continued growth for KSA.

Liquidity:

KSA enjoys high liquidity, with an average daily trading volume exceeding 1 million shares. The tight bid-ask spread further indicates ease of trading the ETF.

Market Dynamics:

Key factors influencing KSA's market environment include:

• Oil prices: Oil exports constitute a significant portion of Saudi Arabia's economy. Fluctuations in oil prices can impact the performance of Saudi Arabian companies and consequently, KSA.
• Government policies: Reforms and initiatives implemented by the Saudi government can influence investor sentiment and economic growth, impacting KSA's performance.
• Global economic conditions: Broader economic trends, such as global economic growth or recessions, can influence capital flows and investor risk appetite, impacting KSA's performance.

Competitors:

KSA's main competitors include:

• VanEck Saudi Arabia ETF (KSAU): Market share of approximately 20%
• Franklin FTSE Saudi Arabia ETF (FAS): Market share of approximately 10%

Expense Ratio:

KSA's expense ratio is 0.57%, which includes management fees and other operational costs.

Investment Approach and Strategy:

KSA passively tracks the MSCI Saudi Arabia 25/50 Index, replicating its holdings and performance. The ETF primarily invests in large and mid-cap stocks across various sectors, with a focus on the largest and most liquid companies in the Saudi Arabian market.

Key Points:

• Large and liquid: KSA is the largest and most liquid Saudi Arabia-focused ETF.
• Strong track record: KSA has historically outperformed its benchmark and competitors.
• Low expense ratio: KSA offers investors a cost-effective way to access the Saudi Arabian market.
• Growth potential: The positive outlook for the Saudi Arabian economy suggests potential for continued growth for KSA.

Risks:

• Volatility: KSA's performance is closely tied to the performance of the Saudi Arabian equity market, which can be volatile.
• Market risk: Political and economic events in Saudi Arabia can impact the performance of the Saudi Arabian stock market and KSA.
• Currency risk: KSA's holdings are denominated in Saudi Riyals, exposing investors to currency risk.

Who Should Consider Investing:

KSA is suitable for investors seeking:

• Exposure to the Saudi Arabian equity market
• Potential for high growth
• Diversification within their emerging markets portfolio
• Tolerance for volatility

Fundamental Rating Based on AI:

Based on an AI-based analysis of financial health, market position, and future prospects, KSA receives a fundamental rating of 8 out of 10. This rating is supported by the ETF's strong track record, low expense ratio, and growth potential. However, investors should be aware of the associated risks, including volatility and market risk.

Resources and Disclaimers:

Data for this analysis was gathered from the following sources:

• iShares website: https://www.ishares.com/us/products/etf/ishares-msci-saudi-arabia-etf
• Yahoo Finance: https://finance.yahoo.com/quote/KSA/
• Morningstar: https://www.morningstar.com/etfs/arcx/ksa/overview

This analysis is for informational purposes only and should not be considered investment advice. Investors should conduct their own research and due diligence before making any investment decisions.