Tadawul’s First ETF

Saudi Arabia’s Tadawul has successfully launched their first ETF (exchange traded fund), Falcom Saudi Equity ETF (Falcom 30).  As per Tadawul’s description, FALCOM Saudi Equity ETF aims to provide investors with long-term capital appreciation and growth. The Fund passively invests in the listed Saudi equities in order to achieve the results that correspond to the performance, before fees and expenses, of the Benchmark Index.

The funded has ended its first trading day with 12.8 million shares traded at a value of SAR271.3 million. The NAV increased by 4.5% while the Tadawul index was down 0.09%. At first I thought that the ETF should mirror the Tadawul index, then I found out that it has its own index which 30 stocks that have the following criteria:

1. – Sharia compliant as per Falcom’s Sharia screening.
2. – For each stock to be eligible, non-trading days in the Saudi Stock Exchange (Tadawul) must not exceed 7 trading days during the past quarter.
3. – Top 30 floating market capitalization stocks. The stocks should also be member of Tadawul public indices.

The following tables shows the current index composition:

Tadawul Symbol	ISIN	Company Name	Trading Name
1020	SA0007879055	Bank AlJazira	BJAZ
1120	SA0007879113	Al Rajhi Bank	Al Rajhi
1140	SA000A0D9HK3	BANK Albilad	AL Bilad
2350	SA000A0MQCJ2	Saudi Kayan Petrochemical Company	Saudi Kayan
2060	SA0007879170	National Industrialization Co	Industrialization
2250	SA000A0B89Q3	Saudi Industrial Investment Group	SIIG
2290	SA000A0HNF36	Yanbu National Petrochemical Company	YANSAB
1211	SA123GA0ITH7	Saudi Arabian Mining Company	MA’ADEN
2380	SA120GAH5617	Rabigh Refining and Petrochemical Co	Petro Rabigh
1150	SA122050HV19	Alinma Bank	Alinma
2010	SA0007879121	Saudi Basic Industries Corp	SABIC
2020	SA0007879139	Saudi Arabia Fertilizers Co	SAFCO
2260	SA000A0B63Y2	Sahara Petrochemical Co	Sahara Petrochemical
2310	SA000A0KFKK0	Saudi International Petrochemical Co	Sipchem
2330	SA000A0LE310	Advanced Polypropylene Company	APPC
3020	SA0007879451	Yamamah Saudi Cement Co. Ltd	Yamamah Cement
3030	SA0007879469	Saudi Cement Company	Saudi Cement
3040	SA0007879493	The Qassim Cement Co	Qassim Cement
3050	SA0007879501	Southern Province Cement Co	Southern Cement
4190	SA000A0BLA62	Jarir Marketing Co	Jarir
5110	SA0007879550	Saudi Electricity Company	Saudi Electricity
2050	SA0007879162	JSavola Group	SAVOLA Group
2280	SA000A0ETHT1	Almarai Company	Almarai
7010	SA0007879543	Saudi TeleCom	STC
7020	SA000A0DM9P2	Etihad Etisalat Co	Etihad Etisalat
7030	SA121053DR18	Mobile Telecommunications Company Saudi Arabia	Zain KSA
4100	SA0007879659	Makkah Construction & Development Co	Makkah
4250	SA000A0MR864	Jabal Omar Development Company	Jabal Omar
4300	SA11U0S23612	Dar Alarkan Real Estate Development Company	Dar Al Arkan
4030	SA0007870054	The National Shipping Co. of Saudi Arabia	Shipping

What is an ETF?

“ETFs are investment funds divided into equal units traded on the exchange during trading time, similar to stocks. ETFs enjoy advantages of both mutual funds and stocks.

Like other investment funds ETFs are composed of a basket of assets (listed companies shares), however unlike mutual funds ETFs are traded on the exchange. ETFs are more transparent since they track the movement of the underlying assets index and investing in the index by the same proportions. It is easier for investor to measure the performance of the ETF by tracking the movement of the underlying assets index. ETF units are traded by Bids and Asks during trading time.” (Tadawul.com.sa)

Difference between ETFs, mutual funds and stocks:

Category	ETFs	Mutual Funds	Stocks
Transparency	More	Less	More
Flexibility	More	Less	More
Cost	Less	More	Less
Diversification	More	More	Less

* username: rupertbu