A series of funds and investment products is being launched by Bahrain-based firms to boost foreign participation in the local capital market. On 2 May, Bahrain stock exchange head Fawzi Behzad said the authorities were encouraging more foreign involvement and welcomed moves to set up funds that will attract both local and international support (MEED 12:5:95, page 17).
On 5 June, Bahrain International Bank (BIB) is to launch an equity fund called the Dilmun Index Fund. It will be the first investment vehicle to allow foreigners to invest in Bahrain-listed shares without restriction. At present, foreigners are only allowed to invest directly in selected shares. Investors will now be able to buy BD 100 ($265) units in the Dilmun fund that will invest in Bahraini stocks and which will itself be listed (MEED 21:4:95).
BIB plans to raise between BD 2.5 million-10 million ($6.6 million-26.5 million). The minimum investment is also BD 100. BIB will manage the fund. Bank of Bahrain & Kuwait will act as custodian and will be the exclusive placement agent in Bahrain.
The Bahrain operations of Citibank was due to close a currency warrants issue on 26 May which will offer investors the chance to
capitalise on fluctuations in the dollar-Deutschmark exchange rate during a 12-month period. It will be the first derivative investment instrument to be listed on the Bahrain exchange.
Citibank is issuing up to $50 million worth of warrants that will be sold in units of $100, with a face value of $5. Investors can buy either a call option on the dollar with a strike price of DM 1.49 or a put option on the dollar with a strike price of DM 1.37, depending on whether the investor expects the dollar to appreciate or depreciate against the mark. The minimum investment is $1,000.
The warrants will be listed at the start of June and will mature on 3 June 1996. For example, if the dollar has appreciated and is worth more than $1=DM 1.49 on the maturity date, then the owner of a call option will receive the difference between the strike price and the new exchange rate. The most each investor can lose is $5 on each warrant bought. The issue is open to all investors, except US citizens or green card holders.
Citibank says there has been strong interest in the product, and that it is likely to be the first of several warrant issues that could track other currencies, equities or commodities.
National Bank of Bahrain (NBB) is launching the NBB Guaranteed Fund, which will be marketed in Bahrain, Saudi Arabia, the UAE and Kuwait. The unit trust will provide total protection for the initial capital investment, and aims to offer annual returns of 15 per cent. The maturity is five years, and the fund will be managed by the London-based GNI. The minimum investment is $10,000, to be sold in $100 units.
These products follow the May initial closing of the Ibn Battutah Asian Growth Fund with capital of about $18 million. The open-ended fund is registered in Malaysia and will invest in Asia’s Islamic markets. However, the promoters, which include Banque Indosuez Bahrain Offshore Banking Unit, are seeking a listing on the Bahrain stock exchange (MEED 19:5:95).