Bahrain's bourse remains healthy...

Although 2006 saw a record loss of billions of dollars across GCC bourses, the Bahrain Stock Exchange (BSE) recently announced its listed companies yielded record net profits of $1.8 billion in 2006, up 26% on 2005 results. Companies distributed $970 million of the net profits as cash dividends to shareholders, an increase of 36.7% compared to 2005.

While many regional bourses were still reeling from the effects of 2006, the first quarter of 2007 represented another positive development for the kingdom's bourse. Along with the Muscat Securities Market, the principal stock exchange of Oman, the BSE was the only regional bourse that registered gains. The total volume of the BSE's All Share Index crossed the 2.8 million mark, the total value of shares traded $3.84 billion and market capitalisation of $20.39 billion.

Fouad Rashid, the BSE's director, attributed the bourse's recent successes to the kingdom's hospitable investment climate. Another reason for the BSE's appeal is its diversified structure, with a thriving market in Islamic bonds, sukuks, a strong mutual fund industry and trade in equities. Moreover, the BSE is unique in the region in terms of its openness to investment from non-nationals. Indeed, GCC citizens are allowed to buy up to 100% of most listed companies while other foreigners may hold up to 49%.

The BSE recently announced an agreement with Mubasher, a financial data provider and subsidiary of National Technology Group (NTG). According to the agreement, the BSE will provide live trading quotes on a real-time basis, making data available to a wide range of investors. This move is expected to increase transparency in the market.

However, there are concerns surrounding the continued stagnant IPO market. The late 2005 failed IPO of Nass Corporation, a family-owned construction company, was a harsh lesson to investors. Nass was the first family-owned company to go public in Bahrain and its listing represented the kingdom's largest IPO in the past eight years.

Nass' story turned sour after subscription closed at the end of October 2005, when many Saudi investors dumped their stock to make a quick profit. The launch price was $1.60 per share but by February 2006, it had fallen to $0.90 from a peak $1.90 in November 2005. The slump revealed the dangers of speculative regional interest in IPOs.

Some industry insiders are questioning the BSE's long-term future. Subhi Benkhadra, the chief executive officer of Esterad Investment Company, told Oxford Business Group, "I believe there will be one to three regional stock exchanges in twenty years time. Dubai is likely to be one of them, I would be surprised if the BSE lasts the course unless it focuses on the listing of funds and provided a more active privatisation programme is implemented."

(C) Oxford Business Group - www.oxfordbusinessgroup.com

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