Invesco has launched the first ETF in Europe that provides passive investment exposure to Saudi Arabia.

The Invesco MSCI Saudi Arabia UCITS ETF is available in US Dollars on the London Stock Exchange.

One of the objectives is to attract foreign direct investment to the Middle Eastern country, with the programme due to be part-funded by a 5% sale of state-owned oil giant Saudi Aramco.

The IPO is likely to be in 2019 and could raise up to $100 billion.

Saudi Arabia began opening its equity markets to foreign investors in 2015 and has since eased foreign investor requirements and brought trade settlement more in line with global standards.

As a result, MSCI has included Saudi Arabia in its annual review process, with an announcement due on 20 June as to whether they will raise it to ‘Emerging Market’ status.

If successful, Saudi Arabia would be included in the MSCI Emerging Markets Index from 2019 with an estimated weighting of around 2.3%, although this figure could be boosted by Aramco and other IPOs. 

Chris Mellor, head of EMEA ETF equity and commodity product management at Invesco, said: “Saudi Arabia is in the early stages of an exciting transformation. The reforms within the ‘Saudi Vision 2030’ programme are intended to reduce the economy’s dependency on government funding and oil exports.

“They have a number of objectives, including increasing the contribution of private sector consumption to GDP, the number of Saudis working in the private sector and the use of solar and other renewable energy sources.

“They also want to encourage major domestic companies to expand across borders and into global markets.”