The disruptions triggered by the COVID-19 pandemic during 2020 have undoubtedly impacted various sectors and affected the global economy and financial markets at an unprecedented level. While the key global equity market indices closed the year with high gains mainly triggered by vaccine announcement and roll-out plans, the GCC equity market indices underperformed their global peers and the majority ended 2020 on a negative note mainly led by the impact of the COVID-19 pandemic and the decline in crude oil prices. The S&P GCC Composite Index ended the year with a decline of 1.72% while the MSCI Frontier Markets Index increased slightly by 1.65%.
Bahrain Bourse’s Market Performance
Bahrain Bourse (BHB) was not an exception to the overall negative performance of GCC equity markets during 2020, where Bahrain All Share Index ended the year at 1,489.78 points with a decline of 7.48% compared to 1,610.18 points in 2019. Similarly, Bahrain Islamic Index ended the year at 650.19 points compared to 760.04 points, decreasing by 14.45% compared to its closing in 2019. The value of shares traded stood at BD 212.80 million compared to BD 286.41 million in 2019, decreasing by 25.70% YoY, whereas the volume of shares traded stood at 1.157 billion shares compared to 1.209 billion shares, increasing by 4.49% YoY. The number of transactions declined by 6.77% YoY, from 20,712 transactions in 2019 to 19,309 transactions in 2020.
Business Agility during Covid-19
Despite the negative indicators in Bahrain Bourse’s overall trading performance, BHB was able to navigate the year and implement its planned projects successfully. BHB has taken various initiatives to adapt and continue its operations smoothly during the rise of the COVID-19 pandemic. To ensure the safety of investors, Bahrain Bourse announced the closure of its trading floor to the public as a preventative measure in March 2020. Further, to ensure the safety of BHB’s employees, a fast turnaround has taken place to implement a swift transition to ‘Working From Home’ to go in line with the Government’s efforts to ensure the safety of the employees as well as smooth and uninterrupted business operations, which comes as a testament to our business resiliency. Moving forward past the pandemic, BHB also introduced women empowerment & “Working From Home” initiatives with the aim of improving the working environment to foster a healthy work-life balance for employees across the organization.
During the year, Bahrain Bourse in cooperation with the Central Bank of Bahrain (CBB) launched the sukuk-based Murabaha service to banks and corporates which is provided through the utilization of Sharia’a-compliant Ijara Sukuk, as the underlying asset for all the Murabaha transactions. The launch of the service goes in line with BHB’s efforts to enhance the diversification of its services by providing new Shariah-compliant financing solutions and alternative investment options to meet the requirements of a broader range of institutional and individual investors. Since the launch of the Murabaha service, a total of eight banks initiated roll-out of the Murabaha services to its underlying client base which includes: Al Baraka Banking Group, Al Baraka Islamic Bank, NBB, Bahrain Islamic Bank, Al Salam Bank-Bahrain, Khaleeji Commercial Bank, National Bank of Kuwait, and SICO.
A significant milestone took place during 2020 on the legislative front in which BHB adopted its new listing rules. The new listing rules aim to clarify the regulatory and organizational framework governing all operational aspects of Bahrain Bourse, particularly future listings. Within the new listing rules, BHB made amendments to the corporate actions timeline to provide shareholders with additional timeframe and flexibility in conducting their trading transactions. In addition, Bahrain Bourse implemented new procedures related to listed companies with accumulated losses of 20% and above of its share capital based on the financial results of the third quarter 2020. The procedures are intended to protect and assist investors in conducting well-informed investment decisions.
Bahrain Clear’s Achievements
The year 2020 witnessed another remarkable achievement by establishment of the ‘Amanat’ Investor Protection Funds Program. The ‘Amanat’ Investor Protection Funds Program has been established as part of BHB’s continuous efforts to develop the capital market infrastructure and ensure market transparency and investor protection. In addition, Bahrain Clear (Bahrain Bourse’s fully-owned subsidiary), was appointed as paying agent to undertake cash dividend distribution with the aim of facilitating cash distribution and making the payment process more efficient through direct deposit into shareholders’ bank accounts. Bahrain Clear also welcomed on board First Abu Dhabi Bank as a custodian going in line with its efforts to enhance post-trade services and expand outreach to regional and global investors.
Within its efforts to adapt to the COVID-19 pandemic, Bahrain Clear started offering virtual AGM Management Service to listed companies that enhanced participation in AGMs and encouraged listed companies to utilize the latest technology for conducting AGMs . Bahrain Bourse also offered the Skiplino Queue Management System allowing investors to pre-book online appointments via smart phones.
International Partnerships & Global Outreach
As part of its efforts to attract international investments, Bahrain Bourse in collaboration with HSBC held a virtual roadshow with the participation of a number of regional and international financial institutions and investment banks. The roadshow seeks to build on last year’s roadshow, where Bahrain Bourse engaged during the year with regional and international financial institutions and investment banks and showcased BHB’s recent market developments and plans in the pipeline.
On the international level, Bahrain Bourse signed an MoU with Israel Diamond Exchange to explore areas of mutual interest and joint cooperation between the two exchanges, and develop channels of communication and foster the relationship between Bahrain Bourse and Israel Diamond Exchange.
Bahrain Bourse continued its efforts to expand Bahrain Trade’s network during 2020, in which Ahli United Bank launched Bahrain Trade under its AUB Trader Platform to further encourage active retail participation and increase its accessibility through various online trading platforms.
To ensure continuity to its awareness programs, Bahrain Bourse continued conducting the monthly saving and investment sessions in its virtual format in cooperation with Bahrain Institute of Banking & Finance (BIBF) to ensure higher reach out. More than 450 beneficiaries attended the sessions that were offered at three levels to address the different needs and expectations of different categories: beginners, intermediate, and advanced. BHB also kicked off a digital version of the Smart Investor Program. To demonstrate its ongoing commitment towards enhancing market literacy and investor awareness, Bahrain Bourse participated in IOSCO’s 2020 World Investor Week for the third consecutive year to raise awareness on the importance of financial literacy extended to various target groups. Bahrain Bourse also concluded the TradeQuest Program by announcing the winners in a virtual ceremony to ensure the safety of all participants.
Bahrain Bourse advanced its efforts to promote sustainability and transparency in Bahrain’s capital market in 2020 by issuing its Environmental, Social & Governance (ESG) voluntary reporting guidelines for listed companies. The guidelines aim to increase awareness and understanding of the importance and benefits of ESG reporting and assist listed companies to address ESG issues in their reporting to meet the requirements of institutional investors for material ESG information. Since the launch of the guidelines, Bahrain Bourse has seen a higher number of uptake from listed companies to embrace ESG disclosure as part of their investor engagement. Within the same context, Bahrain Bourse signed an MoU with the Supreme Council for Environment to encourage listed companies to comply with the environmental rules and requirements and to disclose information related to environmental compliance in its issued reports. In addition, Bahrain Bourse has taken a step forward towards the implementation of its ESG strategy by adopting women empowerment and “Working from Home” initiatives aimed at promoting and empowering employees across the organization, particularly female employees at BHB.
Bahrain Bourse has been keen to participate actively in international activities of federations and associations related to the capital market. As a result, BHB has been elected by the consensus of the members, in addition to Tadawul, as members of the Arab Federation of Exchange’s Board of Directors to represent the Arab Gulf Region. Bahrain Clear has been also elected to preside the Africa and Middle East Depositories Association (AMEDA). This, in return, enhances the confidence of various parties related to the capital market and supports Bahrain Bourse’s role to develop the capital market sector locally and regionally.Following the launch of the Middle East Investor Relations Association (MEIRA) Chapter in Bahrain last year, Bahrain Bourse joined the association’s Board of Directors to support its efforts to promote and develop best practices in Investor Relations (IR) and enhance transparency across the Kingdom’s capital market.
Furthermore, Bahrain Bourse was recognized for achieving “Excellence in Customer Service Award” via the National Suggestions & Complaints System ‘Tawasul’, for its exceptional performance and efficient response via Tawasul. This recognition under the patronage of His Royal Highness Prince Salman bin Hamad Al Khalifa, the Crown Prince and Prime Minister, awarded the top twenty performing government entities within the National Suggestion & Complaint System ‘Tawasul’ in 2020 through a virtual awarding ceremony. Bahrain Bourse joined Tawasul in January 2020, and through consistent and efficient performance, was able to attain the award for the first time since joining ‘Tawasul’, which comes as a testament to the Bourse’s solid framework and response time turnaround in resolving complaints.
On the fixed income side, there were three bond/sukuk listings in 2020 with a total value of BD 575 million, compared to two listings with a value of BD 2.68 billion in 2019. BHB also recorded 77 T-bills listings in 2020 with a total value of BD 4.80 million, compared to 76 new T-bills with a total value of BD 2.27 billion in 2019.
On the administrative front, Bahrain Bourse adopted a unique initiative this year as part of its efforts in promoting gender equality. The initiative aims to foster a healthy work-life balance for female employees within the organization through adopting flexible “Working From Home” measures. BHB also hosted at the beginning of the year a “Ring the Bell for Gender Equality” event for the 2nd consecutive year as part of its commitment towards UN’s Sustainable Stock Exchanges Initiative.Financials
As for the financial performance of Bahrain Bourse in 2020, BHB reported an operating income of BD 2,635,027 in comparison to BD 2,701,719 during 2019 (after excluding one of the non-recurring revenue items), posting a decline of approximately 2.5%. The total operating expenses also decreased slightly from BD 3,782,196 in 2019 to BD 3,621,214 in 2020. BHB recorded a deficit of BD 587,976 in 2020 compared to BD 498,393 in 2019.With the advent of 2021, Bahrain Bourse remains confident in its strategic plan and proven ability to continue delivering solid results in more volatile times. BHB looks forward to bolster its global and regional linkages, and broaden its products and services portfolio to provide an even better strategic fit for a diverse and growing investor base. With the continued support of all stakeholders and especially the Central Bank of Bahrain, Bahrain Bourse is confident that it will realize its vision: A regional multi-asset class marketplace leader.
On behalf of myself and Bahrain Bourse’s employees, I would like to express my sincere thanks and gratitude to His Majesty King Hamad bin Isa Al Khalifa, and His Royal Highness Prince Salman bin Hamad Al Khalifa, Crown Prince and Prime Minister for their continued support to the Bourse and its members.I would also like to take this opportunity to pay tribute to the late Royal Highness Prince Khalifa bin Salman Al-Khalifa who played a dominant role in the development of the financial sector in the Kingdom of Bahrain.I would also like to express my thanks and appreciation to the Chairman and members of BHB’s Board of Directors for their efforts in developing the capital markets and their continuous oversight and guidance. I would also like to express my gratitude to the integral role played by the previous Board of Directors during their tenure from 6th February 2011 to 13th June 2020 in developing the Bourse and their support and contribution towards its success during their tenure.Bahrain Bourse’s achievements would not have been possible without the continuous dedication and commitment of its team in maintaining streamlined and efficient operations throughout this challenging and volatile year for the global economy. The steadfast commitment of the team ensured a safe ‘Working from Home’ transition to ensure everyone’s safety as well as seamless and secure connectivity to all team members to ensure operational resilience.
I would also like to extend my thanks to all stakeholders including brokers, listed companies, custodians, investors, and brokerage firms for their support and cooperation.
Khalifa bin Ebrahim Al-Khalifa
Chief Executive Officer (Bahrain Bourse)
Vice Chairman and Managing Director (Bahrain Clear)