Diversifying in fast-growing markets: A compelling case for Saudi Arabian fixed income
Saudi Arabia’s economic transformation under its ‘Vision 2030’ initiative is reshaping its landscape for global investors. Once reliant on oil, the Kingdom is now one of the fastest-diversifying economies worldwide, driven by structural reforms, a surge in non-oil activity and the growing influence of PIF, its sovereign wealth fund.
This includes a US$200 million cornerstone investment from PIF into a recently launched sovereign bond ETF by State Street Investment Management, offering targeted exposure to Saudi Arabia sovereign issuance.
An investor roundtable in Singapore, held in September 2025, highlighted these developments and the opportunities for increasing access to the country for global allocators, with speakers including:
- Fadi AlSaid, Head of Investment Management, PIF
- Kheng Siang Ng, Asia Pacific Head of Fixed Income and Head of Singapore, State Street Investment Management
- Jennifer Taylor, Head of Emerging Market Debt, Beta Solutions, State Street Investment Management
Notably, with strong fundamentals, a clear policy direction and expanding market access, Saudi Arabia is emerging as a destination for investors seeking sustainable growth within the evolving Gulf Cooperation Council (GCC) story.
From oil dependence to economic diversification
Vision 2030 – a national blueprint to diversify growth, deliver competitive ecosystems and position Saudi Arabia as a global hub for investment, innovation and tourism – is delivering measurable progress.
Non-oil GDP growth has consistently outpaced global averages, with sectors such as tourism, financial services and housing leading the charge. For example, the number of new companies launched under the reform programme exceeds 100, and the Saudi mortgage market has expanded 20-fold – from fewer than 50,000 contracts annually before 2017 to around 1 million today.
This all builds on other advantages. Demographics look promising, with roughly 71% of the population of approximately 35 million under the age of 35.1 And it is geographically vast and diverse, ranging from deserts and mountains, to sandy beaches, waterways and forested areas, across more than 2.1 million square kilometres.
PIF has been the central driver of the country’s overall transformation. Beyond seeking returns, the Fund serves as a catalyst for economic diversification, investing in priority sectors and helping to establish “national champions” across technology, infrastructure and clean energy. It also works to attract strategic foreign capital, co-investing with global partners and fostering greater transparency in Saudi Arabia’s markets.
For investors, one of the key takeaways is that the country’s economic performance is no longer dictated by oil prices.
Market data increasingly show a decoupling between crude volatility and corporate earnings. Over the past five years, while oil prices have fluctuated, Saudi Arabian equities have returned an annualised 12% in US dollar terms – among the strongest in emerging markets (EM).
Stable government spending, a disciplined fiscal policy and a focus on capital investment rather than recurrent expenditure have underpinned this resilience.
Forging a new path for fixed income
The fixed income story is equally compelling. Since joining major global bond indices in 2019, Saudi Arabia has become the second-largest issuer in the EM hard-currency universe, trailing only Indonesia.
Public debt remains low at around 27% of GDP, with sovereign credit ratings solidly in the A range. With consistent issuance across the yield curve and improving liquidity, Saudi Arabia bonds are becoming a cornerstone allocation for EM investors seeking both yield and quality.
Within the broader GCC, the investment landscape is also shifting. Qatar and Kuwait have recently graduated from EM bond indices, leaving Saudi Arabia and the UAE as the primary high-quality Gulf issuers. For global investors seeking yield with stability, that concentration enhances Saudi Arabia’s importance as a core allocation.
The development of Saudi Arabia’s capital markets is accelerating, with new financial instruments expanding access to domestic assets.
A recent milestone was the launch of the SPDR® J.P. Morgan Saudi Arabia Aggregate Bond UCITS ETF (Acc) in Singapore, offering investors efficient, transparent exposure to both US dollar and local currency bonds.
Initially weighted 80% in US dollar bonds and 20% in local currency, the ETF has already shifted to roughly 70/30 as local issuance deepens. This structure not only provides liquidity but also aligns with Saudi Arabia’s developmental agenda to build a vibrant domestic bond market.
The product’s intraday transparency and robust regulatory oversight are designed to instil investor confidence – particularly among private wealth clients seeking straightforward exposure to Saudi Arabian fixed income.
New drivers of growth and investment
Beyond this asset class, opportunities in tourism, logistics and renewable energy are drawing increasing foreign direct investment, especially from Asia. Yet Vision 2030 is still only in its early stages, potentially meaning long-term investors have a unique window to participate in the Kingdom’s growth over time.
Inevitably, challenges remain, from execution risks to navigating global market cycles. Ultimately, however, PIF believes headline GDP figures understate the scale of the opportunity. Beneath the surface of around 6% to 7% growth lies significant expansion in previously underdeveloped industries.
This dynamism is reshaping capital flows. And fixed income has followed suit, as Saudi Arabian debt is increasingly viewed as a high quality, investment-grade anchor within global EM portfolios.
Sources
Disclosures
The views expressed in this article do not represent the views of State Street Investment Management.
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