The year 2019 turned out to be one of the best years for global markets since the onset of the global financial crisis a decade ago despite the backdrop of economic and political tensions. Similarly, the majority of the GCC financial markets performed positively well due to fund inflows following index inclusions, boosting higher levels of liquidity overall. Bahrain Bourse has skillfully navigated the challenges of this evolving global backdrop and delivered a strong set of results in 2019 with 2nd best performance across GCC markets (20.41%), continuing to execute its strategy successfully across its core businesses. With the rise in the Bahrain All Share Index in 2019 by 20.41% (2nd across the GCC markets), outperforming both MSCI GCC Countries Index (10.06%) and MSCI Frontier Markets Index (18.34%) and S&P GCC Composite Index (7.6%), the market capitalization increased by 23.6% to BD 10.13 billion by the end of the year, while Bahrain Islamic Index closed at 760.04 points, decreasing by 7.66% compared to its closing in December 2018. Trading volume stood at 1.157 billion shares representing 19.69% decrease compared to 2018, and trading value for the year stood at BD 286 million representing 11.56% decrease compared to 2019, with an average daily trading value of BD 1.16 million. The number of transactions conducted stood at 20,7112 transactions executed in 2019, 7.73% higher than 2018.
We remain committed to achieving operational excellence and are focused on driving efficiency through several initiatives including implementation of small tick size framework, adoption of AWS cloud technology to enhance performance, as well as joining BENEFIT’s EFTS service ‘Fawateer’ to facilitate online payments. Whilst we strive to facilitate efficient platforms, we attach the highest priority on establishing and maintaining confidence in the market for regional and international investors in capital markets. In this context, Bahrain Bourse has embarked on an ambitious regional and international roadshow plan attracting international fund managers with meetings held in Dubai, UAE and Luxembourg which included the participation of four listed companies including; Bahrain Telecommunications Company (‘Batelco’), Ithmaar Holding, National Bank of Bahrain, and SICO BSC (c). The roadshows provide an opportunity for the senior management of listed companies to meet key decision makers from the world’s largest international fund managers. Change and transformation in the field of technology shape the expectations of various stakeholders including investors, issuers, members, and data vendors. In this context, we use technology as an important tool in the operations and services we conduct, in order to create products and platforms which meet the needs of the market players.
As a signatory to the United Nations Sustainable Stock Exchanges (SSE) initiative, which brings together more than 80 securities exchanges from around the world, Bahrain Bourse is a strong promoter of advancing sustainable practices internally as well as across listed issuers. Environmental, social and governance (ESG) criteria play an increasing role in investment decisions on international markets. Bahrain Bourse is contributing to this trend by encouraging issuers to expand disclosure in this area and helping investors better assess companies corporate social responsibility performance. This is the first year in which Bahrain Bourse reports on sustainability as part of its annual report, which is aligned with BHB’s strategy and aims to support the national economy and provide a sustainable trading environment that increases governance standards.
Enhancing Access via Innovative Platforms
As financial markets evolve, exchange operators worldwide have been focusing on the challenges presented by technological innovation and evolving business models. Bahrain Bourse is attuned to these complexities and works closely with market participants and various stakeholders to thrive in this dynamic environment. To this end, we have worked collaboratively with market participants to link liquidity pools across multiple venues, and develop a broader universe of investors. Ultimately, we want to deliver greater liquidity and an enriched customer experience. In 2019, Bahrain Bourse launched the ‘Bahrain Trade’ platform in collaboration with participating banks which includes Khaleeji Commercial Bank (Khaleeji eTrade) and National Bank of Bahrain (AlWatani Trade). As a result, investors are able to open and account via participating banks and start trading instantaneously. The Bahrain Trade platform goes in line with BHB’s efforts to enhance Bahrain Bourse’s liquidity and depth, thereby strengthening its competitiveness and attracting local, regional and international investors. Due to these efforts, 2019 saw an active inflow of retail investors on the market.
The long-term trend is for exchanges to become integrated platforms where a broad range of products are seamlessly listed and traded, including offering traditionally traded over-the-counter services. BHB is progressing along this trend to offer BHB Private Market, supported by innovations in trading platforms, connectivity, as well as the continued enhancements of capabilities to meet industry needs.
Investor Awareness
BHB has undertaken an array of investor education and market development initiatives aiming to educate the general public about share investments. The year 2019 was no different and substantial amount of resources were allocated to this agenda as the focus remained on enhancing participation of retail investors in the stock market, translating savers into investors, instilling market discipline and promoting shareholder activism in the long run. BHB has always been receptive to the needs of our potential investors, and as such has devised a new program catered towards younger audience ‘Smart Investor’ program in collaboration with INJAZ Bahrain, targeting more than 5500 students within the first year. The Smart Investor was well received by the intended audience and BHB will continue to refine and present the initiative in a better way in 2020. The TradeQuest program continued its progress in its 21st edition. To mark the strides taken on this front and in line with BHB’s strategic objective of ‘Enhancing Market Literacy & Investor Protection’, Bahrain Bourse held a ‘Ring the Bell for Financial Literacy’ to raise awareness and highlight the importance of this aspect.
Throughout the past year, BHB was keen to enhance its effective global presence and assert its leadership in the region through participation in several regional and international conferences and events as well as various engagement sessions held with members and issuers.
Investor Relations
To further develop and enhance best practices in Investor Relations (IR) across listed companies, Bahrain Bourse has established the Middle East Investor Relations Association (MEIRA) - Bahrain chapter along the founding members which includes Aluminium Bahrain (‘ALBA’), Bank ABC, Bahrain Telecommunications Company (‘Batelco’), Ithmaar Holding, National Bank of Bahrain, and SICO BSC (c), and headed by Bahrain Bourse. Under the MEIRA-Bahrain chapter, the Certified Investor Relations Officer Program was rolled out.
International Partnerships
The year 2019 also witnessed Bahrain Bourse and Bahrain Clear stepping up its efforts to establish collaborative relationships with its international counterparties. As at the end of 2019, Bahrain Clear had managed to advance discussions with Edaa in Kingdom of Saudi Arabia to enter into a Memorandum of Understanding (MoU). An MoU will enable clearing houses on both sides to work together and learn from each other’s experiences to enhance market development.
Listings
On the fixed income side, there were 2 bond/sukuk listings in 2019 with a total value of BD 2.68 billion, compared to 4 listings a year earlier. We also recorded 76 T-bills listings in 2019 with a total value of BD 2.27 billion, compared to 42 new T-bills listings a year earlier. Last year also witnessed listing of the first global FinTech company on Bahrain Investment Market, which will pave way for further listings in the future.
Regulatory Front
On the regulatory front, BHB continued to strengthen its legal and regulatory environment by issuing consultation papers on the administrative fines framework for issuers, as well as the operational enhancements of the Delivery Versus Payment (DVP) model framework issued by Bahrain Clear, both of which aim to adopt best in class market & regulatory best practices.
Awards
Furthermore, Bahrain Bourse was recognized as the first Semi-Government Entity to Receive 3rd Level (Outstanding) in Information Security Forum ‘Thiqa’ (Trust) 2019 organized by the Information & eGovernment Authority (iGA). This recognition is a testament to the Bourse’s solid technical framework which meets the highest information security standards, as e-security is considered one of the key pillars of the capital markets globally.
Financials
As for the financial performance of Bahrain Bourse in 2019, operational efficiency remains key in today’s market conditions. BHB reported a positive increase in its gross revenue by 16.8% from BD 2,671,494 in 2018 compared to BD 3,120,239 in 2019, while the total expenses during the year slightly increased by 8.1%, from BD 3,497,470 in 2018 to BD 3,782,196 in 2019. BHB recorded a deficit of BD 498,393in 2019 compared to BD 393,081 in 2018.
BHB’s total assets increased to BD 6,051,276 compared to BD 5,692,150 in 2018, while the total liabilities in 2019 were BD 1,350,057against BD 492,538 in 2018. Shareholders’ equity also decreased from BD 5,199,612 as of 31st December 2018 to BD 4,701,219as of 31st December 2019.
Acknowledgments
I am also happy to share that Bahrain Bourse has entered its Pearl Jubilee year in 2019. It’s a privilege to be part of this institution and the capital markets ecosystem. Starting from humble beginnings (“AlJowhara Market”), Bahrain Bourse has swiftly evolved to offer a unique suite of listing, trading, and settlement & depository services to all stakeholders through an efficient capital markets platform and facilitate innovative capital raising opportunities over a short period of time. This journey spans market reforms, building of an entire capital market ecosystem, innovative products, services & technology and, above all, high standards of ethics and Corporate Governance. With the continued support of all the stakeholders and the Central Bank of Bahrain, I am confident that BHB will reach greater heights in the years to come to achieve its vision: A regional multi-asset class marketplace leader.
On behalf of myself and Bahrain Bourse’s employees, I would like to express my sincere thanks and gratitude to His Majesty King Hamad bin Isa Al Khalifa, and to His Royal Highness Prince Khalifa bin Salman Al Khalifa, Prime Minister, and His Royal Highness Prince Salman bin Hamad Al Khalifa, Crown Prince, Deputy Supreme Commander and First Deputy Prime Minister of the Kingdom of Bahrain for their continued support for the Bourse and its members.
I would also like to express my thanks and appreciation to the Chairman and members of BHB’s Board of Directors for their efforts in developing the capital markets and their continuous support. I also thank Bahrain Bourse’s management and employees for their dedication and hard work, wishing them greater success in further developing Bahrain Bourse and achieving its vision, mission, and objectives in the coming period. I would also like to extend my thanks to the listed companies and brokerage firms for their support and cooperation.
Khalifa bin Ebrahim Al-Khalifa
Chief Executive Officer (Bahrain Bourse)
Vice Chairman and Managing Director (Bahrain Clear)