Open sesame: Myanmar’s stock market makes strides
Foreign investors look set to be allowed into Myanmar's capital markets soon, with new laws close to approval. The news is very welcome as growth has stalled in the country's markets since the first shares started trading on the Yangon exchange last year. However, any celebrations must be tempered by the experiences of Myanmar's neighbouring countries and it must take care to avoid similar pitfalls.
The Yangon Stock Exchange (YSX) has four listings to date but has suffered from waning interest among local investors and sluggish trading figures. The Myanmar stock index was at 551.97 on Tuesday, down from around 1000 on March 25, 2016. Despite talks of primary equity sales when the market opened, all the listed firms neglected to raise new money, instead simply shifting their stocks from the over-the-counter market to the YSX.
But the tide may be turning, albeit slowly. The country’s Directorate of Investment and Company Administration (Dica) last year developed the Myanmar Companies Law with help from the Asian Development Bank.
Dica was expected to submit a draft to parliament by the end of last year, with the law taking effect from April 1, 2017. But after a long delay, the body managed to submit the document to the lower house of parliament in January, where it was eventually approved. It was submitted on July 20 to the upper house of Myanmar’s parliament and got the go-ahead on July 27. It is understood that it now just requires president Htin Kyaw's approval to come into effect.
There is clearly reason to celebrate, given the law opens up the country’s capital markets to international investors. It will lift the limit of foreign ownership in a company before it is considered foreign to 35%, and will also allow offshore investors to own listed shares in local firms. Furthermore, foreign investors will no longer be required to hold separate trading permits.
The YSX desperately needs an injection of offshore money to develop its budding stock market. With more foreign investors, trading turnover will increase and liquidity will grow. As of midday Tuesday local time, only about 11,827 shares had changed hands.
It will also give a fillip to the primary market. First Myanmar Investment floated first in March last year, while Myanmar Thilawa SEZ Holdings followed in May 2016, Myanmar Citizens Bank in August 2016 and First Private Bank in January 2017. With the passing of the Companies Law more primary issuance is expected as local firms will be able to tap into a deeper pool of capital.
This is sorely needed and will apart Myanmar apart from some of its peers. Cambodia and Laos opened up their stock markets years before Myanmar, but have struggled to gain traction. Both those bourses have only five listed companies each. Myanmar is slightly ahead of the competition. Construction company Great Hor Kham, for example, has said it will float and issue primary stock, albeit sometime in the next four years.
The country appears to be making progress, and despite some political and humanitarian turbulence, international investors are keen to jump into the market. Myanmar needs to grab hold of the opportunity while it is still there.