Back in December 2015, Myanmar, a Southeast Asian nation formerly called Burma, opened a new stock exchange in its main city of Yangon. The Yangon Stock Exchange (YSX) was founded, after a 20-year wait, at a cost of $24 million, by the state-owned Myanmar Economic Bank, Daiwa Securities and Japan Exchange Group, a company that operates the Tokyo Stock Exchange.
The stock exchange began trading on Friday with a single listed company, First Myanmar Investment (FMI), one of Myanmar's largest companies. FMI is owned by local tycoon Serge Pun who rang the bell on trading at 11 a.m. (04:30 GMT) inside a renovated colonial building that once housed the country's central bank.
FMI, a financial-services, real-estate and health-care conglomerate didn’t issue any new shares but is moving those that had been traded by dealers in private settings onto the formal exchange. FMI shares rose to 31,000 kyat ($25.70) at the open on Friday, the upper limit for trading for the day after they were listed at 26,000 kyat. A total volume of 112,845 shares changed hands, for a trading value of 3.498 billion kyat ($2.90 million). FMI's market cap was 727,880 million kyat ($603.55 million).
The establishment of the stock market in Yangon was a pet project of the outgoing, military-linked government when Aung San Suu Kyi’s party, the National League for Democracy (NLD) party, ended half a century of dominance by the military by winning a majority of 70 percent in parliament,. The former president, 82-year old Than Shwe, hoped that this ‘farewell gesture” would strengthen his party’s reputation as the modernizers of Myanmar’s economy after decades of neglect.
Myanma Economic Bank owns 51 percent of the exchange, creating a potential problem if foreign investors should be allowed to invest in the future. The remaining 49% is owned by Daiwa Securities and Japan Exchange Group. For now, only Myanmar citizens can trade.
According to Han Thar Myint, chairman of the NLD’s economic committee, the new government’s agenda on the stock exchange, as well as broader economic policies, is still vague. However, it is likely to be guarded and the companies listed will have to be “well audited, and transparent” or no one will dare invest in the stock exchange. People in Myanmar have very little experience with banking systems, let alone with a stock market.
Cambodia’s stock exchange, which opened its doors to trading in 2012, has only three listed companies, while Laos’s stock exchange has five. Both exchanges have strained to boost liquidity and attract new companies to list.
Investors’ Opportunity
One senior analyst at the Frontier Strategy Group, a global research and advisory firm, said the Myanmar exchange is an attempt to signal the beginning of the country’s integration into the regional and global economy.
And indeed, a new stock exchange, anywhere in the world, is an opportunity for investors eager to find new outlets for their money, to step in on the ground floor, establish a presence and hopefully ride the wave upwards.
The volatility and uncertainty of the world’s markets has been putting pressure on existing companies. The number of new companies floating on the world's stock markets hit a seven-year low in the first three months of 2016 with only 167 initial public offerings (IPOs) completed during the first three months of the year and raising only $12.1 billion. When compared to the same period in 2015, total capital fell by 70 percent, while volume slipped 39 percent.
Many factors are attributed to the market instability and mandy companies are adopting a "wait-and-see" approach as to whether a stock market flotation is the best option.
According to analysts, the Asia-Pacific region is still a growing market. In fact while IPO volumes slipped 31 percent in Asia-Pacific's first quarter — compared to 2015's Q1 — it delivered 61 percent of global IPO deals within 2016's winter months. In addition, Japan is expected to deliver "another bumper year", with investor sentiment in the region remaining "broadly solid" delivering its best first quarter results since 2008.