New com­pa­nies law is game changer for YSX

The Myanmar Times - Weekend - - Front Page - 8 HTYN LYNN AUNG htin­lyn­naung@mm­times.com KANG WAN CHERN chern@mm­times.com Photo: Nyan Zay Htet ‘This is a nec­es­sary first step for the econ­omy.’ Peter Beynon Chair of Bri­tish Cham­ber of Com­merce Myan­mar

The en­act­ment of the Myan­mar Com­pa­nies Law will bring about change for lo­cal com­pa­nies listed or plan­ning to list on the Yan­gon Stock Ex­change and lead to fur­ther de­vel­op­ment of the econ­omy.

THE en­act­ment of the new Myan­mar Com­pa­nies Law will bring about change for lo­cal com­pa­nies listed or plan­ning to list on the Yan­gon Stock Ex­change (YSX), lead­ing to fur­ther de­vel­op­ment in the econ­omy.

Un­der the new Com­pa­nies Law, which was of­fi­cially signed into leg­is­la­tion by Pres­i­dent U Htin Kyaw on Wed­nes­day, foreigner in­vestors will now be per­mit­ted to take up to a 35 per­cent stake in lo­cal com­pa­nies. It also stip­u­lates that busi­nesses with for­eign stakes of more than 35pc will be clas­si­fied as for­eign com­pa­nies.

This is pos­i­tive for the YSX as well as the wider econ­omy. “It is a huge step for­ward. The new amended law mod­ern­izes the Myan­mar com­pa­nies le­gal regime and brings it into step with in­ter­na­tional best prac­tices. And, when fully im­ple­mented, it will en­cour­age for­eign in­vest­ment and pro­vide needed liq­uid­ity to Myan­mar com­pa­nies,” said Wil­liam Green­lee, man­ag­ing direc­tor of DFDL’S Myan­mar of­fice.

U Tun Tun, se­nior fi­nan­cial of­fi­cer and ex­ec­u­tive direc­tor of Ysx-listed First Myan­mar In­vest­ment Com­pany (FMI), agreed. “The emer­gence of this law will re­sult in more for­eign di­rect in­vest­ments into Myan­mar. With more for­eign in­vest­ments in [lo­cal firms], these busi­nesses will be able to ex­pand and strengthen their mar­ket share through bet­ter ac­cess to funds and im­proved liq­uid­ity in the stock mar­ket. As such, this new leg­is­la­tion is very en­cour­ag­ing for the busi­ness com­mu­nity.”

“The new Myan­mar Com­pa­nies Law will pro­vide op­por­tu­ni­ties for for­eign­ers to in­vest and buy shares in Ysx-listed com­pa­nies pro­vid­ing the liq­uid­ity nec­es­sary for an ef­fi­cient and func­tional stock ex­change,” YSX se­nior ex­ec­u­tive of­fi­cer U Thet Tun Oo said.

That, in turn, could spur more com­pa­nies to list on the lo­cal bourse. Al­ready, THM Tele­com Pub­lic Com­pany, has re­ceived ap­proval to list on the YSX. The an­nounce­ment was made on Mon­day, just two days be­fore the new law was ap­proved. When THM com­pletes the nec­es­sary pro­ce­dures and even­tu­ally lists within the next month or two, it will be the fifth com­pany on the YSX.

In­deed, with more for­eign participation per­mit­ted, trad­ing vol­umes on the YSX are ex­pected to rise af­ter re­cently hit­ting its all-time low. On Thurs­day, the Myan­mar Stock Price In­dex closed at 474.72, not far from its record low of 451.39 on No­vem­ber 17. A to­tal of just 7,138 shares in the four ex­ist­ing listed com­pa­nies ex­changed hands Thurs­day.

Melvyn Pun, CEO of Yoma Strategic, the Sin­ga­pore-listed as­so­ci­ate com­pany of FMI, reck­ons the new law will drive the lo­cal cap­i­tal mar­kets for­ward. “The pass­ing of the Com­pa­nies Law is a game changer. I ex­pect lo­cal cor­po­ra­tions and banks to ben­e­fit from re­cap­i­tal­i­sa­tion by in­ter­na­tional in­vestors, which will spur eco­nomic growth and strengthen lo­cal com­pa­nies,” he said. De­tails needed Still, lawyers and busi­ness insiders said it could take a while for the econ­omy to ab­sorb the im­pact of the new law.

“While the new Com­pa­nies Law gives in­vestors so many more op­tions com­pared to the pre­vi­ous 103-year-old Com­pa­nies Act, there are many de­tails in the new Com­pa­nies Law that will need to be fur­ther ex­plained in the com­ing weeks. It will be very in­ter­est­ing to see how the 35pc for­eign own­er­ship al­lowance of Myan­mar com­pa­nies will be di­gested by the dif­fer­ent min­istries,” said Bob Tseng, a lawyer at Thanl­win Le­gal.

Other lawyers point out that while the new law will make it eas­ier to do busi­ness and set up new com­pa­nies, for­eign own­er­ship in land or fi­nan­cial in­sti­tu­tions may still be re­stricted by other gov­ern­ment min­istries. For ex­am­ple, even though the Com­pa­nies Law states that for­eign­ers can take up to a 35pc stake in all lo­cal com­pa­nies, in the bank­ing sec­tor, the Cen­tral Bank still has the power to re­strict eq­uity own­er­ship in the lo­cal banks.

For now though, the busi­ness com­mu­nity is ap­plaud­ing the move. “While the new act brings Myan­mar more up to date in its le­gal in­fra­struc­ture, there is plenty still to be done to at­tract in­creased lev­els of for­eign in­vest­ment into the coun­try. This is a nec­es­sary first step for the econ­omy,” Peter Beynon, chair of Bri­tish Cham­ber of Com­merce Myan­mar, said.

“The adop­tion of this law rep­re­sents another sig­nif­i­cant up­date of the le­gal in­vest­ment en­vi­ron­ment in Myan­mar. Al­though a lot re­mains to be done in or­der to make Myan­mar com­pet­i­tive, from a le­gal stand­point, with its ASEAN neigh­bours, a solid foun­da­tion is now be­ing build to­wards a brighter fu­ture for the peo­ple of Myan­mar,” said Eric Rose, lead direc­tor of Herzfeld Ru­bin Meyer & Rose Law Firm. – Ad­di­tional re­port­ing by

Thomp­son Chau

Ex­perts ex­pect the wider econ­omy to ben­e­fit from the new leg­is­la­tion.

Trad­ing on the YSX is ex­pected to surge with the pass­ing of the new Com­pa­nies Law. Photo: EPA

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