Falcom Financial floats Petrochemicals ETF

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MUSCAT -- TadawulTadawul, the Saudi bourseSaudi bourse, has listed a second exchange trade fund (ETF) from Falcom Financial ServicesFalcom Financial Services, the Muscat office of the Saudi investment bank announced here this week.

FalcomFalcom has been working closely with the Saudi regulator and capital market authorities for the last two years to engineer the environment that supports the introduction of a Petrochemicals ETF.

FalcomFalcom is already a pioneer in the ETF business, having earlier launched the Mena region's first exchange trade fund, FalcomFalcom F30, which introduced clients to a new, sophisticated investment vehicle in place of the 'swap' route.

The Fund invests at least 95 per cent of its assets in equities from the petrochemical sector that are Shariah-compliant, listed and traded on the TadawulTadawul.

The Fund will passively invest in the components of FSPI Falcom Saudi Petrochemical Index and the Benchmark Index. However, Fund's rebalancing activities will be undertaken periodically (at least once a quarter) to ensure proper tracking of performance of the benchmark index and keeping of adequate cash in the Fund.

Unlike many mutual funds, the Falcom Saudi Petrochemical ETF will not try to "beat" the Benchmark and does not seek temporary defensive investments when the market declines or appears overvalued. The Fund aims to replicate the performance of the Benchmark Index, the company said in a press statement.

The Fund manager will assess appropriateness of the Benchmark Index at least on an annual basis in order to ensure that the overall Fund objectives of long-term growth and capital appreciation are suitable.

The Fund invests in the investment universe of the Benchmark Index, FSPI Falcom Saudi Petrochemical Index, which consists of Shariah-compliant shares of all companies in the petrochemical sector of the Saudi Stock Exchange.

"Innovation is the key," says Adeeb al Sowailim, CEO of Falcom Financial ServicesFalcom Financial Services. "With the ETF, we had to invent as well as invest in a whole new risk management tool, as classical models fell short as derivatives and other hedging instruments are not allowed under the Shariah law neither is shorting allowed."

"On the investor empowerment front, our information portal falcomwatch.com went through a comprehensive upgrade and this enhanced the site traffic. We are in the forefront of index development, with the first licensed index by the Saudi stock market.

Now you can see our investment empowerment and decision-making technologies helping our clients in the region as we provide the platforms for Oman. ETFWATCH is also serving our client's needs to check the INAV instantaneously."

By Staff Reporter

© Oman Daily Observer 2010