In­vestors learn trade for new bourse

The Pak Banker - - MARKETS/SPORTS -

Yan­gon Stock Ex­change (YSX) is due to de­but its first listed com­pany on Fri­day, just days be­fore a new civil­ian govern­ment over­seen by Aung San Suu Kyi comes to power in a na­tion fast open­ing up af­ter decades of mil­i­tary rule. The start of trad­ing, long af­ter the bourse was first en­vis­aged, is a vivid il­lus­tra­tion of Myan­mar's eco­nomic hand­i­cap -- a coun­try that still has no credit rat­ing and where busi­ness has long been ham­strung by in­grained cor­rup­tion.

But it also en­cap­su­lates the ex­cite­ment and op­ti­mism that has gripped both lo­cal and for­eign in­vestors alike. Dozens of peo­ple ev­ery week have at­tended the YSX classes for those un­fa­mil­iar with share­trad­ing, which in­clude lessons on in­vest­ment risks and re­wards as well as mul­ti­me­dia guides to stock pur­chas­ing.

"It is great for Myan­mar peo­ple to learn about the stock mar­ket. It will bring new hope for our busi­ness sec­tor," busi­ness con­sul­tant Nwe Ni Soe told AFP at a re­cent train­ing day.

Un­der the mil­i­tary, Myan­mar was plunged into poverty and pum­melled by bank­ing crises, in­ter­na­tional sanc­tions and ar­bi­trary eco­nomic poli­cies that de­stroyed the once vi­brant econ­omy and saw or­di­nary peo­ple hoard sav­ings in as­sets like gold.

The tide be­gan turn­ing un­der the out­go­ing re­formist quasi-civil­ian govern­ment which took power in 2011. A hand­ful of for­eign banks have slowly crept into the coun­try, while a raft of new busi­ness and fi­nance laws have be­gun to un­tan­gle a messy le­gal land­scape. The World Bank says the coun­try could grow by as much as eight per­cent a year for the next five years, but says firms are strug­gling with ac­cess to fi­nance.

Myan­mar's in­com­ing govern­ment is faced with a raft of chal­lenges as it looks to en­cour­age in­vest­ment and cre­ate jobs.

In the way is a weak kyat cur­rency, de­crepit in­fra­struc­ture, patchy elec­tric­ity and an ur­gent need to im­prove skills in a na­tion whose education sys­tem with­ered with ne­glect un­der the junta.

The YSX will ini­tially launch with just a sin­gle firm, First Myan­mar In­vest­ment run by Myan­mar ty­coon Serge Pun, and be open only to do­mes­tic in­vestors. Tun Tun, FMI's ex­ec­u­tive di­rec­tor and chief fi­nance of­fi­cer, said he hoped the bourse would pro­vide a "healthy cap­i­tal mar­ket for the ben­e­fits of both in­vestors and busi­nesses", urg­ing au­thor­i­ties to ac­cel­er­ate plans to al­low for­eign in­vest­ment. With its sis­ter firm Yoma Strate­gic Hold­ings listed in Sin­ga­pore and around 6,800 share­hold­ers through an in-house sys­tem, FMI al­ready has ex­pe­ri­ence of stock­trad­ing, a rar­ity in Myan­mar.

Sev­eral other firms that have been ap­proved to list, in­clud­ing the Ja­pan-backed Thi­lawa Spe­cial Eco­nomic Zone, have yet to fi­nalise their prepa­ra­tions.

Ra­jiv Biswas, Asia-Pa­cific chief econ­o­mist, IHS Global In­sight, said it would take time for YSX to over­come an ar­ray of hur­dles, like build­ing up enough stocks to trade, cre­at­ing liq­uid­ity and putting in place strong gov­er­nance stan­dards.

"Rel­a­tively new stock ex­changes need to build con­fi­dence among in­vestors about the trans­parency of listed com­pa­nies in their stock ex­change fil­ings, as well as set­ting tough reg­u­la­tory stan­dards to pre­vent acts such as in­sider trad­ing or mar­ket ma­nip­u­la­tion," he said.

But he added that the mar­ket could have a "cru­cial role to play" in the fu­ture for both govern­ment and com­pa­nies to raise equity and debt for "fund­ing their eco­nomic ex­pan­sion plans". The bourse has been decades in the mak­ing. In 1996 Ja­panese firm Daiwa Se­cu­ri­ties and a state bank set up the Myan­mar Se­cu­ri­ties Ex­change Cen­tre, but this al­lowed over-the-counter sales of shares in just two firms. "We didn't make much progress un­der the last junta regime," said Thet Htun Oo, a se­nior bourse of­fi­cial. A joint ven­ture agree­ment was even­tu­ally signed in 2014, with Myanma Eco­nomic Bank own­ing a con­trol­ling 51 per­cent stake in YSX, with the re­main­der di­vided be­tween Ja­panese part­ners. It is now housed in a newly-ren­o­vated colo­nial-era build­ing, re­plete with a gleam­ing trad­ing bell, sou­venir shop and cafe.

Of­fi­cials are aim­ing to at­tract 30 to 50 firms in five years. Early in­vestors are ex­pected to be busi­nesses and in­di­vid­u­als, and Thet Htun Oo said they are "very ea­ger".

At its cer­e­mo­nial open­ing in De­cem­ber, of­fi­cials were stunned to see a crowd of peo­ple out­side want­ing to buy shares, some from as far away as Myan­mar's se­cond largest city Man­dalay. That en­thu­si­asm is on show at the YSX's weekly classes. "YSX is a chance for the fu­ture," said busi­ness ad­vi­sor Than Win at a re­cent train­ing ses­sion.

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