Sheikh Khalifa bin Ebrahim Al Khalifa, CEO, Bahrain Bourse: Interview

Interview: Sheikh Khalifa bin Ebrahim Al Khalifa

What macroeconomic scenarios are most likely to impact Bahrain Bourse’s performance in the future?

SHEIKH KHALIFA BIN EBRAHIM AL KHALIFA: Soon there will be greater cooperation between exchanges in the GCC. Some of the benefits of closer engagement are better time and resource management, and reducing barriers to entry. We are transforming passporting regulations, which will enable all regional brokers access to regional jurisdictions. Cutting red tape in this way will be positive for exchanges in the region, as more brokers in the regional market space should lead to more investors and therefore greater liquidity. In addition, the Unified Investor Number project complements the pass-porting initiative, because an investor will not need to reapply to receive country-specific credentials.

How can Bahrain Bourse work to encourage more listings by small and medium-sized enterprises?

SHEIKH KHALIFA: Most exchanges try to create a more robust listing pipeline. In fact, this topic is often discussed at meetings of the World Federation of Exchanges. Creative solutions abound to help countries incentivise greater listings; however, there is not a one-size-fits-all approach. Listing in and of itself should not be a goal. To achieve a listing is to serve a purpose, namely growth, but each firm – just as each exchange – has a unique set of traits. Each one must question their strategies and motivations for listing, as there are benefits and drawbacks that come with the process.

Bahrain Bourse fully supports the Bahrain Investment Market (BIM) initiative, which supports companies in taking steps towards a flotation or partial flotation. It is in the third round of funding where we can help firms make the leap, as the capital requirements are that much more serious. We are in talks to move the BIM to a cloud-based system, allowing firms more flexibility in the listing process with regards to disclosing certain data and information. The key is to allow companies the freedom of choice: they decide their own next steps.

In what ways have technological advancements impacted the Bahrain Bourse?

SHEIKH KHALIFA: Bahrain Trade eliminates the duplicate know your customer (KYC) process where profiles were devised by banks and then by us. We have integrated our systems with the banks’ by digitally linking them so they can feed us the requisite KYC intelligence, which allows us to create an investor profile that we can share with the bank. The primary benefit of this is the ability to open new market segments. Brokers are now experiencing growth from domestic clients, rather than the traditional foreign investor, and when locals open a retail account, they can opt into a Bahrain Bourse investment account. The impact has been considerable given that all these pieces are coming together with the Bahrain Liquidity Fund, which incentivises the sell side to have more shares readily tradeable, in turn improving market liquidity. On the buy side we have Bahrain Trade, which has brought in new investors. In all our undertakings we analyse both the buy and sell side to make sure solutions are suitable and sustainable.

To what extent has the recent reclassification of the Saudi and Kuwaiti exchanges to emerging market status affected the Bahrain Bourse?

SHEIKH KHALIFA: We have seen a higher rate of foreign investment inflows to the bourse, but this may not be directly correlated to the reclassification of other exchanges. However, a reclassification of any exchange will provide spillover effects to the region; the trickle-down effect will naturally bring greater investor interest in regional money markets. The Bahrain Bourse has the highest foreign-to-domestic investment ratio of all GCC bourses, thus we are currently focusing on the on-boarding of active retail investors. We recently completed an international investors roadshow to Luxembourg, where we received positive feedback from FTSE Russell, with two criteria upgraded and one criterion pending to be upgraded to “emerging” status.