Interview: Sheikh Khalifa bin Ebrahim Al Khalifa

Which efforts has BHB undertaken in order to widen retail investor participation?

SHEIKH KHALIFA BIN EBRAHIM AL KHALIFA: In terms of widening investor participation, we have recently announced the rollout of a new service called Bahrain Trade, which enables individuals holding retail accounts with select financial institutions to trade directly on BHB via an online broker platform. We have partnered with two licensed brokers to offer this service, Mubasher and SICO, and currently have three participating financial institutions: Bank of Bahrain and Kuwait, National Bank of Bahrain, and Khaleeji Commercial Bank.

What are your expectations for the Bahrain Investment Market (BIM)?

SHEIKH KHALIFA: In terms of companies we’re interested in listing, SMEs coming to BIM should be focused purely on growth. We are not trying to bring in business just to increase the liquidity of the overall market, or to increase foreign interest in the local market, or for any other reason. BIM is meant to be a place where firms can be compared against their sector index and learn how to operate formally in the same way larger companies do, until they grow big enough to list on the main market. Hence the minimal – BD1000 ($2650) – cost of listing. Depending on the float, this could be a lower cost than a bank loan. This means that SMEs can diversify their funding sources beyond simply going to banks for loans.

There are many firms in the pipeline, and two are ready to launch. Only allowing qualified investors to take part limits the pool of investors and the amount of trading that can be done. Instead of only accepting investors with an appetite for high risk, we plan to limit the liability investors are exposed to through our sponsor system, in which sponsors are responsible for first vetting the companies and then ensuring they operate in a professional manner. We also have several additional risk-reducing requirements for businesses. For example, the management team must have relevant expertise in the field.

What are some of the value-added services offered to investors in the exchange?

SHEIKH KHALIFA: We are introducing a number of services, including blockchain e-voting for shareholders, which will eliminate the need for shareholders to send a proxy to annual general meetings in order to vote. Currently, even foreign investors have to come to Bahrain or send a proxy to vote, but we have developed a system with a technology partner which enables remote voting. Bahrain Clear, a fully-owned subsidiary of BHB, has also started offering automated cash dividend payments through myShare cards, a partnership with Al Salam Bank Bahrain. The card will enable Bahrain Clear to credit cash dividends instantly into the shareholder’s card balance, which goes in line with efforts made to enhance post-trade services. In addition, we are expecting to launch a short selling feature in 2019.

Where are some of the best opportunities for investors in Bahrain’s capital markets?

SHEIKH KHALIFA: One thing that sets Bahrain apart is the real estate investment trust (REIT) framework. The Trusts Law backs REITs in Bahrain, in contrast to other jurisdictions that do not have such sound regulatory backing. Bahrain is the only market in the region with the complete legal framework to support a REIT structure. REITs are now open to all investors in Bahrain. Many companies listed on BHB are linked to government projects and have consequently been adversely affected by the government’s fiscal situation. However, government debt has also opened up certain opportunities for investors. Future government funding needs may call for the issuance of sukuk (Islamic bonds) or exchange-traded funds that could invite active retail participation at competitive rates.