The Bahrain All Share Index grew by 14 per cent last year, the second-highest in the GCC region after Qatar at 18 per cent, a top official of a leading Bahrain-based investment firm has said.

According to Securities and Investment Company (SICO) chief executive Najla Al Shirawi, this compares with a negative return of minus two per cent by the S&P GCC Index, which was at plus 24 per cent at end of August last year, said a report in the Gulf Daily News (GDN), our sister publication.

Growth of the Bahrain benchmark, she said, was driven by buoyant market conditions for the first nine months of the year, and supported by new initiatives from the Bahrain Bourse.

Al Shirawi was speaking at CFA Society Bahrain's ninth annual forecast dinner and charterholder ceremony at the Ritz-Carlton Bahrain, Hotel and Spa.

The chief executive said Bahrain, along with most other regional markets, had a rocky start to the new year, due in part to the decline in oil prices and a continuing volatile global economic environment.

She said the two main challenges for Bahrain's equity market were illiquidity and low free float.

"One of the key reasons is the low free float in blue chip companies, with nine of the top 15 stocks having a free float of lower than 25 per cent. A low free float makes it almost impossible to execute large orders without significant market impact."

The index's skew towards the financial sector, which represents 73 per cent of the total index weight, was also a key challenge to growth.

Lack of sector diversity discourages regional and international investors from investing in the Bahrain market since most funds mandates have sector caps, Al Shirawi said.

Also, the kingdom, she said has had only eight initial public offerings (IPOs) during the last decade with the most recent being Zain last year.

"With the share price of most IPOs subsequently trading well below their offer price, there is, not surprisingly, a degree of cynicism among investors.

The annual traded value of the Bahrain Bourse was only three per cent of market capitalisation of $22 billion, which was the lowest in the region.

The bourse's annual average daily traded value of $2.4 million is a 10th of the smallest market in the GCC after Bahrain, the Muscat Securities Market.

According to her, Bahrain's benchmark index remains one of the most attractive in the GCC on relative valuations, with price-to-earnings and market-to-book multiples at a discount of 29 per cent and 47 per cent respectively, to the current median for GCC markets.

"This is despite, a dividend yield of 4.7 per cent, which is the highest in the region.

Al Shirawi said low liquidity, free float and trading volumes were responsible for the discount in Bahrain's market.

Twenty new charterholders received their CFA charters from Al Shirawi.

CFA Society Bahrain president Mahmoud Nawar said Bahrain continues to enjoy high growth in charterholders and memberships, which can help Bahrain enhance its positioning as a prominent financial centre.

"This year will see the completion of our first Mutamahin development programme for fresh university graduates," he said. - TradeArabia News Service