Better late than never

24 October 2003
From their vantage point in the Gulf, Bahraini investors have had a grandstand view of the equities surge that has pushed the region's stock exchanges to the forefront of the world's emerging markets. While the driving forces of excess liquidity, strong fundamentals and renewed regional confidence have held true for all Gulf markets, it is the bourses of Kuwait and Saudi Arabia that have grabbed investors' attention, rocketing to record highs since the end of the war in Iraq. The ascent of Bahraini stocks has been more modest, and it is only in recent months that the rise in the benchmark Bahrain Stock Exchange (BSE) index has picked up pace.

'Since the end of summer we are beginning to see the BSE catching up with the rest of the gang,' says Mohammed Adnan Afzal, equities analyst at the local Securities & Investments Company (SICO). 'It is not unusual for Bahrain to lag behind the region's major markets as it is often only once the initial allure of the big hitters begins to fade that investors turn to the smaller markets.'

With Kuwait and Saudi Arabia now coming down from their highs, the time is ripe for Bahrain to reap the continued interest in Gulf stocks. 'The heavy volume of trade on other markets means that valuations for local listed firms are cheap and investors are now looking to capitalise on this,' says Afzal. The movement to Manama is evident in trading volumes on the BSE. While the turnover averaged only BD 6.7 million ($17.7 million) in the first seven months of 2003, a surge of activity doubled turnover to BD 12.9 million ($34.2 million) in August.

Investor interest has initially been focused on Bahrain's blue chips, with commercial banking stocks and shares in Bahrain Telecommunications Company (Batelco) securing the bulk of trading activity in October. 'The positive second and third-quarter results are an encouraging indication of things to come,' says Afzal. 'Despite growing interest, the valuations are still cheap and there is no downside risk in the stocks for the foreseeable future.'

But it is not only the market giants that are attracting the eye of the region's investors. Funds are also being channelled towards some of the smaller stocks that usually wouldn't warrant a look-in. 'With 4 April 2004 set as the date for the kingdom's hosting of the Formula 1 championships, there is going to be a lot of money flowing into Bahrain in the coming months,' says Afzal. 'It is going to provide an important growth opportunity for a lot of local companies and as a result we are seeing interest picking up in the smaller hotel and tourism stocks.'

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