Loading ...The Heat in the Middle East
Saudi Arabia and Qatar country ETFs have gained more than 20% over the last year!
Saudi Arabia ETF (KSA): +23% since Jan 1, 2018
Qatar ETF (QAT): +24% since Jan 1, 2018
These nations are highly associated with energy: Saudi Arabia primarily known as a top oil exporter, Qatar is known as being a top natural gas exporter.
So we’d expect the ETFs to be biased to energy companies. But this isn’t the case. The top ten holdings of the Qatar ETF shows ZERO energy companies. Mostly banks in Qatar’s top 10 holdings. Similar story with Saudi Arabia: KSA’s top ten holdings are mostly banks with the number 1 holding being Saudi Basic Industries which is a diversified chemical company (15% weighting).
Middle Eastern banks and financials are where the heat is… -Harry
“Mostly banks”
Not a scientific survey, but it seems whenever I explore a frontier country ETF, its “all” banks. Disproportionate shares in every case. They seldom seem to match the outside world’s perception of what the country’s economy is mostly about.
Indeed, Pedro, this is my experience as well.
You look at a lesser known frontier market like Nigeria, and see that its ETF is also mostly banks or European subsidiaries.
https://www.globalxfunds.com/funds/nge/
I guess it makes sense for fund creators at iShares, Global X et al to do this since the local banks are exposed to most aspects of the local economy, and the banks tend to have the highest market caps and longest history in these countries which can help limit volatility and make the ETFs more palatable to outside investors.