BSE suffers summertime blues

26 August 2005
The Bahrain All-Shares Index (BASI), like most of its Gulf counterparts, has experienced a correction over the summer months. While the bourses of Qatar, Saudi Arabia and Dubai recovered momentum in early August, selling pressure continued on the Bahrain Stock Exchange (BSE). The BASI's 12.4 per cent year-to-date rise is impressive and valuations are for the most part reasonable. But trading - while rising - remains thin and investors' eyes are firmly on the kingdom's first initial public offering (IPO) in eight years, due early in the fourth quarter.

Surprisingly given the habitual summer exodus, both the volume and value of shares traded increased substantially in July. According to figures from Kuwait-based Global Investment House, volume leapt in July by 67.4 per cent while the value changing hands rose by a similarly impressive 19.4 per cent. The climb was largely driven by Ahli United Bank (AUB), trade in the shares of which quadrupled during the month. It has been a few weeks of contrasting fortunes for the bank. On the one hand, first-half profits were reported up 25 per cent to $79 million, and AUB increased its stake in Bank of Kuwait & the Middle East, an early regional conquest, by 19.2 per cent to 75 per cent. On the other, the Central Bank of Egypt rebuffed its planned bid for state-owned Banque Misr.

The banking sector, the market driver, is in general experiencing mixed fortunes. All the major banks have announced healthy six-month earnings growth. Yet National Bank of Bahrain'sshares had risen in price by nearly 19 per cent in the year to early August - reaching a price/earnings (PE) ratio of 19 - while shares in Bank of Bahrain & Kuwait (BBK)have fallen in value by almost the same amount. But BBK's stock could be one to watch, with market rumours rife that a takeover by Commercial Bank of Kuwaitcould be on the cards. BBK's management have for some time spoken of possible moves to merge with a fellow GCC bank.

The BSE's banking sector is soon to welcome back a prodigal son. Trading resumes of shares in BMB Investment Bankon 4 September after the successful completion of a capital increase and long-awaited loan refinancing. Another recent new listing has deepened the bond market on the bourse, as Bahrain Commercial Facilities Company's recently launched BD 10 million ($26.3 million) five-year bond was offered to the secondary market in early July, following closely the listing of a $100 million sukuk issue by Kuwait's Commercial Real Estate Company.

The main upcoming event titillating investors is the IPO of shares in Nass Corporation, the holding company for 10 of the businesses forming local family business the Nass Group. A private placement of 24 per cent of the firm's BD 20 million ($52.6 million) capital was closed in late June and the public offering of a further 24 per cent of shares is due to come to market around October.

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