MENA Asset Management Survey 2012 - National Bank of Abu Dhabi

Exchange Traded Funds
according to its website. Meanwhile, Van Eck filed plans to launch a Saudi Arabia ETF
and a small cap Saudi Arabia ETF in May 2012. ETFs focusing on the region have yet
to take off elsewhere in the world. MENA ETF assets remain small and have not
grown meaningfully since 2010. The last ETF launched which is domiciled in the
region was the HSBC Amanah Saudi 20 ETF, but its size remains small. ETFs domiciled
in the GCC have struggled for a number of reasons. All are equity ETFs and investor
appetite for equities remains weak. They have small sizes and, thus, are not
attractive to institutional investors. Total expense ratios remain relatively high at
about 1%. HSBC Amanah Saudi 20 ETF compares more favourably with a total expense
ratio of 75 basis points. The other two ETFs domiciled in Saudi Arabia have also
struggled despite non-resident foreigners being allowed to trade in these. Some possible
reasons, in addition to the factors above, could be the absence of independent
custodian, administrator, and market makers for the two Saudi ETFs. The index provider
for these is Tadawul (Saudi Stock Exchange) rather than the major international index
providers.
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