Bahrain Economy 2012: Economic Overview

Global Investment House – Kuwait – Bahrain Economic Overview – Bahrain Economic Report: During the year 2011, Bahrain‘s economy reeled under socio-political unrest that started at the beginning of the year. Consequently, Bahrain Bourse had the worst performance in all GCC markets. Bahrain All Share index shed 20.15 percent of its value by the end of FY2011.

Trading Activity
The political unrest had its effects on the trading activity of the exchange. During FY2011, 520.2mn shares were traded on Bahrain Bourse, down from 612.2mn shares traded in FY2010 (-15.0 percent). Aggregate value of shares traded stood at BHD105.0mn (USD276.5mn), down from BHD108.4mn (USD285.6mn) in FY2010 (-3.2 percent).

BB Trading Activities

Source: Zawya

Sector wise, Commercial Banks sector was the most active in terms of volume and value of shares traded in FY2011, with 269.8mn shares exchanged at an aggregate value of BHD50.0mn (USD132.2mn), which represented 51.9 percent and 47.6 percent, respectively, of the market’s aggregate volume and value traded for FY2011. Within the sector, Ahli United Bank (AUB) was the top volume leader, a total of 147.0mn of AUB’s shares were exchanged, at an aggregate value of BHD39.8mn (USD105.2mn), representing 28.3 percent and 37.9 percent of the total traded volume and value on the exchange in FY2011, respectively. The bank’s share price retreated by 5.3 percent YoY, ending at USD0.665.

Top Five Traded Companies – FY2011

 Source: Bahrain Stock Exchange & Global Research

Sectoral Performance
No gaining sectors were seen in Bahrain Bourse by the end of FY2011. Investment index retreated by 28.8 percent by the end of FY2011. Within the sector, share price of Al-Baraka Banking Group retreated by 20.07 percent YoY, while Arab Banking Corporation ended 17.65 percent lower.

Industrial index was also a notable decliner, shedding 26.73 percent of its value. Selling pressure mounted on shares of heavyweight, Aluminum Bahrain (Alba) throughout the year 2011, on concerns over planned gas price hike. However, during the last quarter of the year, Alba’s share price recovered and limited it annual loss to 25.97 percent by the end of FY2011, ending at BHD0.660.

In the meantime, Services index dropped by 18.24 percent. Share price of Bahrain Telecommunications Company ended FY2011 at BHD0.392, down by 23.14 percent.

On the company’s level, one five companies managed to ended the year on a higher note. The Bahrain Ship Repairing and Engineering Company was the top gainer, up by 19.19 percent. Bahrain Family Leisure Company followed, up by 14.13 percent. In the meantime, share price of Bahrain Cinema Company, National Bank of Bahrain, and Bahrain National Holding Company posted marginal advances of 4 percent, 2.02 percent, and 0.49 percent, respectively.

Bahrain Corporate Profitability – 2011

The companies listed on the Bahrain stock exchange witnessed a substantial jump in profitability in 2011. The aggregate net profit, based on 39 companies out of a total of 50 companies increased by 181.2% to BHD928mn. However, it is important to put this surge into perspective as 88.0% of the growth was contributed by the Investment sector. The investment sector posted a profit of BHD228.5mn in 2011 compared to a loss of BHD299.4mn in 2010. If we exclude Gulf Finance House profit and loss figures from the calculation, Bahrain’s corporate profitability increased by 36.5%YoY in 2011. 

The Investment Sector
As mentioned above, investment sector was the major contributor to Bahrain corporate profitability growth in 2011. Heavyweight, Gulf Finance House returned to profitability after posting a hefty decline of BHD349.4mn in 2010. The 2010 results were adversely affected by impairment for investments and difficult economic conditions. The other major contributor was Ithmaar Bank which net loss decreased to BHD62.9mn in 2011 compared to BHD150.2mn in 2010. 

Industrial sector
The industrial sector was the other major growth sector with a profitability growth of 52.9%. The growth was largely driven by Aluminum Bahrain (ALBA) which profit increased substantially by 53.3% to BHD211.9mn. The net profit growth was driven by higher production and sales along with cost saving measures.

Banking sector
Banking sector witnessed a modest growth of 20.6% in 2011. The growth was driven by 17.0% profitability growth in Ahli United Bank, the largest company in Bahrain in terms of market capitalization. Meanwhile, Bahrain Islamic Bank also managed to reduce its loss to BHD17.4mn in 2011 compared to BHD39.7mn in 2010. 

Corporate Earnings by Sector

Source: Gulfbase

Insurance Sector
Insurance sector was a major loser during 2011 as its profitability moved into the red zone. Net loss for the sector was BHD11.0mn in 2011 compared to BHD31.1mn in 2010. Profitability was dented by significant decline in Arab Insurance Group. The company posted a loss of BHD19.1mn in 2011 compared to a profit of BHD20.8mn in 2010.

Hotel and Tourism Sector
Hotel and tourism sector also witnessed a massive decline in profitability of 47.9%. This sector was particularly hit hard in the aftermath of political unrest in the country.

Services Sector
The profitability of the services sector declined by 11.9% in 2011. The profitability of services sector is dominated by Batelco, the telecommunication operator. The profitability of the company has been under pressure recently particularly with the entry of third mobile operator VIVA in Bahrain.

This research report was prepared and issued by Global Investment House (Kuwait).