The Bahrain Liquidity Fund is supported by a number of market participants and has been vested with $100m of assets in cash and shares. The fund will act as a market maker, providing two way quotes on most of the listed stocks with a reasonable spread to allow the investors to actively trade their stocks.
To ensure high governance standards, the fund’s activities and performance will be evaluated and monitored on timely basis by a supervisory board representing the seed investors.
By improving liquidity, the fund aims to address one of the primary concerns that has made investing in stocks listed on Bahrain Bourse less attractive, albeit the prevailing attractive valuations. Restricted liquidity currently causes securities to trade at a discount to their underlying value and regional peers – the introduction of the Bahrain Liquidity Fund aims to help reduce that discount over the medium to long term.
The fund will help attract new investors and deepen Bahrain’s capital markets and is anticipated to help local businesses raise capital and have greater access to alternative courses of financing other than bank lending, making it easier for them to find the right funding to help them grow.
Bahrain Bourse has seen a number of initiatives in recent months, aimed at enhancing local capital markets. These include the introduction of the Bahrain Islamic Index (the GCC’s first Shari’a-compliant index), the introduction of Real Estate Investment Trusts (REITs) rules and the offering of Bahraini government bonds and treasury bills.
Sh. Khalifa bin Ebrahim Al Khalifa, Chief Executive Officer of Bahrain Bourse, said: “Capital markets have a very important role to play in funding the growth throughout Bahrain. They have the potential to enable businesses to grow faster and create more jobs and greater prosperity, but they will only be able to do this if they have enough liquidity.
“The Bahrain Liquidity Fund is part of a series of reforms that will help to enhance and deepen Bahrain’s capital markets, helping the market to reach its potential and bringing benefits to businesses and investors.”
Ms. Najla M. Al Shirawi, Chief Executive Officer of Securities & Investment Company (SICO) also commented: “As the first approved market maker on the Bahrain Bourse, we are delighted to announce the launch of Bahrain Liquidity Fund. This has been collaboration between SICO and a number of prominent market participants, with the support of the Central Bank of Bahrain and Bahrain Bourse. I would like to thank everyone for their contribution and unprecedented support in realising this initiative.
“More liquid capital markets can provide real benefits to the economy. They are the heart of any economy through which savings are deployed into long-term investments. A well developed and vibrant capital market will contribute immensely to higher economic growth and more diverse economy.”