Bahrain Bourse needs more liquidity despite 43% surge

Hamad I Mohammed/Reuters

• Bourse value boost over five years
• Bulk of growth from select stocks
• Total trades in April up 83%

The Bahrain Bourse has surged by almost 43 percent in the past five years, but experts have warned that the Gulf state must prioritise further listings to bring more liquidity into the market.

The bulk of the growth on the kingdom’s main exchange has come from a select number of liquid stocks, topped by Aluminium Bahrain, which has the highest value traded over the past five years at over BHD220 million ($584 million).

This was followed by KFH Bahrain – including value traded for Ahli United Bank before the two lenders merged – at almost BHD212 million; and Gulf Financial Group at BHD141 million.

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“We believe that Bahrain Bourse has to increase overall liquidity since trades are centred around only a few stocks in the market,” said Junaid Ansari, director of investment strategy and research at Kamco Invest.

The Bahrain market ranked fourth in the GCC in terms of index returns over the past five years after Abu Dhabi (+84.5 percent), Dubai (+65.2 percent) and Saudi Arabia (+46.5 percent).

Total volume traded on the Bahrain Bourse in April increased 82.7 percent on the previous month to reach 184 million shares. Total value was also up 5.5 percent, reaching BHD24.5 million. 

However, the bourse finished the month down 0.7 percent in its All Share Index, according to Vijay Valecha, chief investment officer at Century Financial.

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The CEO of Bahrain Bourse, Khalifa Al Khalifa, told Argaam last month that there were plans to list a number of government and semi-government entities over the next two years.

“This is another option on the government’s efforts to diversify its revenue sources away from oil, in a similar strategy as to how Saudi Arabia has sought to raise funds in sales in stakes of Aramco,” said James Swanston, Middle East and North Africa economist with Capital Economics.

The kingdom’s financial sector may provide candidates for listing. The sector has overtaken oil as the largest contributor to its GDP, standing at 18.1 percent in Q3 2023.

There are more than 120 fintechs operating in Bahrain across sectors including payments and remittances, tech enablers and platforms, regulation and compliance, alternative finance and funding, and wealth management and investment.

“We have a few companies which are closer than others, but I would say within the next three to five years maximum, I think that we’re probably going to see our first unicorns coming out of Bahrain,” Bader Sater, CEO of Bahrain FinTech Bay, told AGBI.

Ansari said one of the biggest challenges as Bahrain tries to attract companies is competition from its GCC neighbours, particularly the UAE and Saudi Arabia. In total, 21 listings from Saudi Arabia have been announced for this year.

Ansari suggested collaboration or cross-listing agreements with other exchanges “should be mutually beneficial for the region as well as Bahrain Bourse”.

At more than $120 per barrel, Bahrain has the highest fiscal breakeven oil price in the Gulf. Its GDP is expected to reach $47 billion this year according to the International Monetary Fund. This is by far the smallest figure in the GCC bloc of countries.