Dubai: Fund managers and banks are in talks with S & P Dow Jones Indices, a global index provider, to launch an exchange traded fund, which will invest in companies in the GCC, Charbel S. Azzi, Head of Middle East, Africa & CIS, at S & P Dow Jones Indices told Gulf News.
“We are in discussion with several parties in the region to look at another ETF hopefully a GCC one. We are discussing in terms of how to create it, what to create on and how it will add value to investors,” said Azzi at his modern office in the Dubai International Financial Centre.
“If it is a GCC ETF, we will be looking to list in the GCC. We want the liquidity to remain in the GCC. Basically, all GCC investors would be able to invest in it.” S & P Dow Jones Indices has been running an ETF currently in Saudi Arabia with HSBC for the past three and a half years that invest in top 20 Sharia-compliant companies. The AUM is currently at about $20-30 million.
“The retail investors in Saudi is still not cost driven. To buy ETF is much cheaper to buy individual stock. You get the top 20 Sariah most liquid stocks by just buying into that ETF. But the ETF will take off once the market opens,” said Azzi.
In November, BlackRock, the world’s largest money manager, said it has sought approval for its iShares MSCI Saudi Arabia Capped ETF from the U.S. Securities & Exchange Commission. The fund will seek to track the results of an MSCI provisional Saudi Arabia index.
Even “Qatar is looking start listing ETF’s in the market, which is a big push and we do need products such as ETF’s in the market. As a largest index provider in the world, we are big pusher of ETF’s because it promotes transparency, liquidity and most importantly it gives an investor a choice while investing,” he added.
Dollar inflows in UAE:
Earlier this year, S & P Dow Jones Indices upgraded UAE and Qatar markets to emerging markets from frontier ones, a move that is expected to bring millions of dollars in fund flows.
UAE and Qatar being upgraded has been great to all of us in terms of institutional and retail space because from fund management perspective a lot of fund managers were looking at an allocation to the UAE and Qatar. The dollar value inflow has been higher, he said.
The very big catalyst has been markets themselves. They have upgraded themselves from technological point of view, settlement and marketing point of view.
The DFM conducted a road show in the United States last month to market their capabilities to foreign institutional investors.
“We were in Saudi two weeks ago, meeting with the exchange and the CMA, they are looking at an aggressive time frame to open their markets,” said Azzi.
Saudi Arabia, the world’s biggest exporter of crude oil, is preparing to open its $526 billion stock exchange to foreign investors next year. Foreigners currently can’t buy Saudi-listed shares directly, accessing the market through equity swaps and exchange-traded funds instead. The Tadawul All Share Index has risen 6.25 per cent this year. Saudi is the largest markets in the region, with $450 billion of market capitalisation.
“Saudi being one of the last closed market, this will create an influx of money not only to Saudi but also to the region. We have a GCC index, that is widely followed in the region both by conventional asset managers and Sariah. Opening up of Saudi market would boost foreign direct investment and diversified sticky money,” said Azzi.