Desribe bahrain stock market - Essay Example

Bahrain Stock Market Table of Contents Question 3 Question 2 4 Reference 6 Question Describe the securities traded in the Bahrain Stock Market and the Regulator supervision over the financial market. The Stock exchange of Bahrain is known as Bahrain Bourse which is the only nationalized stock exchange in Kingdom of Bahrain. This stock exchange was established in 1987 and used to be known as Bahrain Stock Exchange. However, it started its first trading with 29 listed companies in June 1989. During 1999, automated trading system (ATS) was introduced and investors started the transaction electronically.

In order to bring better regulation in the capital market, the regulation authority was transferred to Central Bank of Bahrain (CBB) from Ministry of Commerce during 2002 (Bahrain Bourse, “Introduction”). Capital Markets Supervision Directorate (CMSD) of Central Bank of Bahrain is the apex regulatory body responsible for supervising capital market. The primary objective of CBB in this regard is to ensure the investors’ protection by maintaining the integrity. In order to follow a globally accepted standard for proper accounting and financial reporting practices in Bahrain, it is following the principle set by International Organization of Securities Commissions (IOSCO).

The CMSD has been constantly working for developing the investors’ trust on Bahrain Bourse. CMSD undertakes a number of responsibilities like regulating the brokering houses, clearing houses and central depositories and approval of new offerings. It also undertakes the proper judiciary enforcement, market surveillance and investor education initiatives etc (Central Bank of Bahrain-a, “Functions & Contact Details”). With matured supervision and stricter regulation, Bahrain Stock Exchange has been emerging rapidly.

Currently, 50 equities 35 mutual funds and 19 bonds are listed and traded regularly. Bahrain being an Islamic country, the conventional western bonds and Islamic sovereign Sukuk both are traded (Central Bank of Bahrain-b, “Capital Markets”). Bahrain Bourse is consist of total six major sectors that includes commercial banks, insurance, industrial, hotel & tourism, services and investment and during 2009, total market capitalization was nearly 6,131.01 million dinar. There are three major performance indices i.e. Bahrain All Share Index, Dow Jones Bahrain Index and Esterad Index.

Besides, there are six sectorial indices based on six major sectors (Bahrain Bourse, p.18-20). Question 2 Investigate the way of issuing and trading sovereign Sukuk. The Islamic financial market and its related law are very quite different from the Western or the Eastern financial system. Therefore, the financial products are also quite different in nature and feature from the products available in non-Islamic financial market. Sukuk is one of the famous financial certificate in available in the Islamic financial market which quite similar to bonds available in Western financial.

The Islamic financial law is based on the Islamic religious law, known as Sharia, and as per this law, interest paying bonds are restricted. In case of Sukuk, the issuers sell the certificate instead of bond to a group of investor. Sukuk is considered being less risky due to higher transparency of obligation and right. The issuers and the investors enter into a contractual agreement where issuer is supposed to buy back the Sukuk within specific maturity at predetermined price (Wilson, p.1). Sovereign Sukuk is an important tool for Islamic government to control the monetary supply, interest rate and inflation.

Sukuk are available in different denomination with different maturities and traded in primary and secondary market. Basically, central banks issue the sovereign Sukuk and use it as open market operation. Due its extra-safety, its rate of rerun is quite lower and hence can be used flexibly increasing and absorbing the market’s liquidity (Oxford Business Group, p.102). Reference Bahrain Bourse. “Introduction”. No date. Brief History. June 21, 2011. . Bahrain Bourse. 2009. Annual Report. June 21, 2011. . Central Bank of Bahrain-a.

“Functions & Contact Details”. 2011. Capital Markets Supervision. June 21, 2011. . Central Bank of Bahrain-b, “Capital Markets”. 2011. The Financial Sector. June 21, 2011. . Oxford Business Group. The Report: Dubai. Oxford Business Group. 2008. Wilson, R. July 19, 2004. Islamic Bonds: Your Guide to Issuing, Structuring and Investing in Sukuk: Overview of the sukuk market. June 20, 2011. .