JEDDAH - The Bahrain Financial Exchange, scheduled to open in October, will start trading in Islamic debt next year, Chief Executive Officer Arshad Khan said on Monday.
Eight Sukuk valued at about $2.9 billion trade on the existing Bahrain Stock Exchange, compared with 20 at a face amount of $16 billion listed on Nasdaq Dubai, data on exchange websites show.
The London Stock Exchange has attracted $17.7 billion from 26 securities.
Bahrain has the largest number of Islamic banks in the Middle East.
Issuers are favoring the most-active markets to ensure investors can trade their securities, with General Electric Capital Corp., the world’s biggest non-bank finance company, listing $500 million of Shariah-compliant debt sold in November in Malaysia, London and Dubai.
“We are quite hopeful that we’ll see a very liquid secondary market in Sukuk, which does not exist right now, whether in London or anywhere else,” Khan said in an interview on Thursday in Manama.
The exchange would allow investors to list Islamic bonds, real-estate investment trusts, exchange-traded funds and options.
It will also create an electronic platform this year that will allow banks and companies to buy and sell commodities used to back so-called Murabahah transactions, Khan said.
Bahrain is “trying to sustain a niche, which has traditionally been in the area of Islamic finance,” said Riyadh-based John Sfakianakis, chief economist at Banque Saudi Fransi.
“Islamic banking is under a lot of competition from the regional competitors such as Dubai, Qatar, Kuwait and Saudi Arabia.”
There were 27 Islamic banks registered in Bahrain as of June, and eight in the United Arab Emirates, according to data on the central banks’ websites.
Malaysia, the Islamic finance hub in Asia, has 18 Islamic banks.
“We will get a lot of interest from the region and the London market,” Bahrain Financial Exchange’s Khan said.
“In the Gulf Arab region, companies are using the London market to do their business, so of course when we set up the Murabahah platform this year it will attract them from London.” - SG/Agencies