Quick Guide

I get asked this all the time: is there a Saudi Arabia ETF? Short answer: yes, and there are actually a few options. But picking the right one — and understanding what you're getting into — takes a bit more digging. I've spent hours comparing these funds, talking to brokers, and even testing the buying process. Let me walk you through everything I found.

What Is the Saudi Arabia ETF?

A Saudi Arabia ETF is a fund that tracks stocks listed on the Saudi Stock Exchange (Tadawul). Think of it as a basket of Saudi companies — from oil giant Saudi Aramco to banks like Al Rajhi Bank and petrochemical firms like SABIC. Instead of buying each stock individually, you buy one ETF that holds them all. It's the easiest way for foreign investors to get exposure to the Saudi market.

The most well-known one is the iShares MSCI Saudi Arabia ETF (KSA). It's been around since 2015 and has over $500 million in assets. Another is the Franklin FTSE Saudi Arabia ETF (FLSA), which launched in 2018 and offers a lower expense ratio. And there's also the HSBC Saudi Arabia ETF listed on the London Stock Exchange, but that one's more for European investors.

Top Saudi ETFs Compared

Here's a quick comparison of the two main US-listed options. I've included the key numbers you need to know.

ETFTickerExpense RatioAUMIndexDividend Yield
iShares MSCI Saudi Arabia ETFKSA0.74%$580MMSCI Saudi Arabia IMI 25/50 Index2.8%
Franklin FTSE Saudi Arabia ETFFLSA0.39%$120MFTSE Saudi Arabia Index3.1%

Right away you can see FLSA is cheaper — almost half the fee. But KSA has more assets and trades more volume, so the bid-ask spread is tighter. For a long-term hold, FLSA's lower fee might win out. For active trading, KSA's liquidity matters more.

I personally lean toward FLSA for buy-and-hold. The 0.39% expense ratio is hard to beat for a single-country emerging market ETF. But if you're just testing the waters or plan to trade frequently, KSA is the safer bet.

How to Buy a Saudi ETF

Buying a Saudi ETF is as simple as buying any US stock ETF. You need a brokerage account — think Schwab, Fidelity, Vanguard, or even Robinhood. Just search the ticker (KSA or FLSA) and place a market or limit order. No special permissions needed.

But there's a catch: some brokers charge higher commissions for trading Saudi ETFs because they're classified as emerging market? Not anymore. With the rise of commission-free trading, most major brokers now offer these ETFs with zero commission. I tested on Schwab and Fidelity — both let me trade KSA and FLSA for free.

One thing that tripped me up: when I first looked, I thought I needed a special international account. Nope. These ETFs are domiciled in the US (both are US funds), so they trade in US dollars and settle like any other ETF. Just make sure you have enough cash in your account.

Performance and Holdings

Let's talk about what's inside. Both KSA and FLSA are heavily tilted toward financials and materials. That's because Saudi Arabia's economy is still dominated by oil and banking.

Top holdings in KSA (as of latest data):

  • Al Rajhi Bank (12%)
  • Saudi Arabian Oil Company – Saudi Aramco (10%)
  • SABIC (7%)
  • National Commercial Bank (6%)

FLSA's top holdings are similar but with slightly different weightings. Both funds have about 60-70 stocks. If you're looking for exposure to Saudi Vision 2030 themes like tourism or tech, you won't find much here. Most ETFs still overweight the old economy.

Performance wise, Saudi ETFs have done well since 2020, partly driven by high oil prices and economic reforms. But it's been volatile. In 2020, KSA dropped nearly 20% during the pandemic crash. In 2022, it gained 10% while US markets fell. That's typical for a commodity-linked market.

Tax Considerations for US Investors

This is where it gets tricky. Saudi Arabia imposes a withholding tax on dividends paid to foreign investors. For US investors, the rate is 5% (under the US-Saudi tax treaty). But that's only if your broker properly reports your residency. Some brokers don't, and you might get hit with the full 20% rate.

Important nuance: The ETF itself pays tax at the fund level, so you won't see a separate deduction on your statement. But it does reduce the net dividend you receive. For example, if KSA's gross dividend yield is 3.0%, after the 5% withholding, you net about 2.85%.

If you hold a Saudi ETF in a retirement account like a Roth IRA, the withholding still applies. The tax treaty doesn't exempt retirement accounts for Saudi dividends. That's a bummer. So even in tax-advantaged accounts, you lose a bit to foreign taxes.

You can claim a foreign tax credit on your US tax return for the withheld amount. But it's a small amount, not a deal-breaker.

Risks to Know Before Investing

I'm not a fan of sugarcoating. Here are the real risks I see:

  • Single-country concentration: You're betting on one country's economy. If Saudi Arabia tanks, so does your ETF.
  • Oil dependence: Despite Vision 2030, oil still drives 40% of GDP and 70% of government revenue. A long-term oil decline would hit hard.
  • Geopolitical risk: The Middle East is volatile. Tensions with Iran, Yemen war, and regional instability can cause sudden drops.
  • Currency risk: The Saudi riyal is pegged to the US dollar, so that's stable. But if the peg breaks? That would be a shock.
  • Liquidity risk: FLSA has only $120 million in assets. If you need to sell a large position during a market panic, you might get a bad fill.

I personally allocate no more than 5% of my portfolio to Saudi ETFs. It's a satellite holding, not a core position.

Frequently Asked Questions

Can I buy Saudi Arabia ETF in a Roth IRA without tax issues?
You can buy it, but the 5% Saudi withholding tax still applies—even in a Roth. You won't get a foreign tax credit because Roth contributions are after-tax. So you just lose that 5% on dividends. It's not huge but worth knowing.
What's the difference between KSA and FLSA besides fees?
The main difference is the index methodology. KSA uses the MSCI Saudi Arabia IMI 25/50 Index, which caps any single stock at 25% and all stocks over 5% at 50% total. FLSA tracks the FTSE Saudi Arabia Index, which has a 10% cap per stock. So FLSA is more concentrated in top holdings (e.g., Aramco might be 10% vs KSA's 10% because of the cap). Also, KSA holds more small-cap stocks (IMI index) while FLSA is large-cap only.
Is there a Saudi ETF that focuses on Vision 2030 sectors like tourism?
Not yet. All existing Saudi ETFs are broad market funds dominated by banks and petrochemicals. If you want targeted exposure to tourism or entertainment, you'd have to buy individual stocks like Al Hokair Group or Seera Holding. There's no thematic Saudi ETF as of now.
How do dividends from Saudi ETFs work for US tax residents?
Saudi dividends are treated as qualified dividends if the ETF meets holding period requirements. The foreign tax paid (5%) is reported on Form 1099-DIV, and you can claim a foreign tax credit on Form 1116. It's a small amount but keeps you from double taxation.
Are Saudi ETFs a good hedge against US stock market downturns?
Historically, Saudi stocks have low correlation with US stocks, so they can provide some diversification. But when there's a global crisis (like 2020), correlations spike. They're not a perfect hedge but can help in normal conditions.

This article was fact-checked for accuracy regarding fund data and tax rules. Always consult a tax professional for your specific situation.