THE BAHRAIN STOCK EXCHANGE

Started as early as 1989, the Bahrain Stock Exchange is one of the established stock exchanges in the Gulf. The market has around 35 listed companies. There are about 11 brokerage companies operating in the stock market.

MARKET CAPITALIZATION AND GDP

The market capitalization was around BD 1.95 billion during the second quarter of 1997, almost 97% of 1997 GDP at current prices. The banking and investment sector accounted for 73% of the market capitalization, with Arab Banking Corporation (19.3%) and Investcorp (14.4%) together representing more than 1/3rd of the total market size. Another large capitalized company is Batelco which accounts for around 17.3% of the total market capitalization.

Trading Volume

With the surge in share prices, the trading volume continued to rise and touched its peak at BD 96.4 million in 1993. However, trading volume started declining on account of falling prices between 1994 and 1995 and has started picking up since the second quarter of 1996. Trading volume continued to increase during the first half of 1997 and the market recorded its highest turnover during the month of June, 1997. We expect that trading volume will go up further due to continued buying support.

Valuation, Earnings and Dividend Yield

The valuation, earnings and dividend yields in the market are quite attractive as compared to other emerging markets. The average price earnings multiple of the market and the dividend yield was around 12.5 and 5.4% as of the 2nd quarter of 1997, based on 1996 earnings. P/E multiple and dividend yield of some of the major companies are depicted below.

 

Price Appreciation in The Market

Due to the strong oil boom, hectic offshore banking activities and increasing trade and tourism, the market witnessed a continuous growth until 1993, with an appreciation of 92.8% in the index. However, Kuwait crisis and its resultant impact in the Gulf countries and internal political disturbances dampened the market sentiment and the market witnessed a decline of 31% between 1994 and 1995. The market moved sideways during 1996 mainly on account of internal disturbances and as the internal situation settled down, has started picking up since the second half of 1996. During the first half of 1997, the market moved up by 5% and we expect the trend to continue.

 

Future Prospects

The future prospects of the market are good as the Government intend to increase its expenditure and broaden the industrial base further. We expect a few new issues to hit the market during 1998 and 1999. However, the market does not provide enough depth due to the small size of the economy and adverse political situation may affect the performance of the market.