Glancing at stock market prices scribbled in columns on large white boards, Sudanese broker Maha Abdul-Rahim hopes a new electronic trading system will bring more money to the Khartoum Stock Exchange.

The bourse plans to launch a computer-based trading system next week, ending the practice of having brokers write share price offers on boards -- if a deal is reached, a bourse employee crosses out the numbers and prints out a paper to be signed by buyer and seller.

The new system will achieve more transparency. You will know the identity of sellers, said Abdul-Rahim, while signing papers after the daily one-hour trading session.

In manual trade, brokers often agree informally on a share sale with buyers and sellers before they come to the small trading room on the 11th floor of a commercial building and offer their shares. Stock market officials hope a more transparent electronic trading system will attract foreign investors from centres such as Abu Dhabi or Dubai.

Cross-listings will be easier, as will access, said General Manager Osman Hamad Khair, ushering a visitor into the new trading room as technicians made final tests before launch on Sunday.

The bourse is tiny, with a total market value of around 6.4 billion Sudanese pounds (1.5 billion pounds). That compares with about $350 billion (224.3 billion pounds) for the Saudi Arabian stock market, the biggest Arab bourse.

In a second expansion step, the Khartoum bourse, which was launched in 1995, also wants to establish trading platforms for gold and other minerals and Sudan's main agricultural export products, such as gum arabic and maize. Khair gave no time frame.

The launch of the electronic system has been delayed for more than a year, which officials blame on a U.S. trade embargo complicating technology imports. U.S. sanctions were imposed over a decade ago amid charges that Sudan sponsored terrorism.

LIQUIDITY

Sudan hopes the electronic system will attract enough investment to help overcome the economic crisis caused by the secession of South Sudan in July, which deprived Sudan of most of its oil production. Annual inflation hit 19 percent in November, while the Sudanese pound has fallen against the dollar on the black market as oil revenues have dried up.

Most Western firms shun Sudan because of insurgencies in three parts of the vast African country, tensions with South Sudan, and the U.S. sanctions. So China and Arab countries are the country's main trading partners.

Khair said the bourse was preparing to sign more cooperation agreements with Arab stock exchanges such as Qatar to allow cross-listings of stocks and technical assistance. Such deals already exist with Abu Dhabi and Oman; among the small number of cross-listed stocks are telecommunications firm Sudatel , also listed in Abu Dhabi, and Al Salam Bank Sudan, also listed in Dubai.

Currently, foreign portfolio investment in Sudan focuses on short-term Islamic bonds, so-called shahamas, which are sold by the central bank on behalf of the government to fund its budget -- desperate for cash, it offers a yield of almost 20 percent. No precise data exists but officials say foreign investors account for up to 30 percent of purchases of shahamas.

There are some foreign investors from the United Arab Emirates and Saudi Arabia, said broker Abdul-Rahim. They mostly buy shahamas....I think the economy and currency need to stabilise for more foreigners to come.

British fund manager Silk Invest, which focuses on emerging and frontier markets around the world, says it is considering investment in Sudanese stocks, though limited liquidity and trading hours as well as concern over custody of securities are challenges.

We have Sudatel and Sudanese Free Zones & Markets on our radar screen, but as yet have made no investments in Sudan, said Chief Investment Officer Daniel Broby.

The latter, a sharia-compliant duty free zone, is exposed to a number of areas that we see as growing strongly in the country, namely consumer goods, readymade clothes, toys, perfumes and cosmetics.

The biggest obstacle is the lack of liquidity of most stocks. In the first week of December, only 22 share deals were done worth a total of 523,354 pounds, compared to 112 shahama deals worth 44.74 million pounds, according to official data.

The Khartoum stock exchange's benchmark share index is almost unchanged compared to a year ago. Many shares do not trade for weeks, or longer. The stock of Animal Resources Bank, a large local bank, has not moved for two years, said a bourse official, pointing to a white board.

Stocks are often not easy to sell. There was big interest in Sudani until 2006 when they paid high dividends. Now they are investing a lot and the stock has fallen and there is not much interest any more, Abdul-Rahim said.

Most people buy shahamas because they are guaranteed by the central bank.

Even with the launch of the electronic system, bourse officials and bankers say more will be needed to improve transparency. For example, the bourse wants ownership of the market to move from the finance ministry to an independent board, but a new securities bill is still waiting for government and parliamentary approval, Khair said.

Regulations are still from 1994, he said.

Few of the more than 50 listed firms have investor relations departments, and corporate earnings data often ends up in newspapers or with brokers before being published on the bourse's website.

Khaled Zada, head of treasury and foreign relations at Bank of Khartoum, one of the heavyweight stocks listed on the bourse, said the new trading system was only a first step.

They need more regulation, more solid companies, more specific enforcements.

(Editing by Andrew Torchia)