Yangon Stock Exchange Will Not Run Until July

The first long-awaited initial public offerings on the Yangon Stock Exchange will not include any new shares, said underwriters, while the first company to raise fresh capital is unlikely to list until July.

The YSX opened last December to much fanfare but with no stocks to trade. Crowds gathered, a giant bell was rung and officials announced that six companies were eligible to list.Since then, the market has been quiet.Two of the six companies, First Myanmar Investment (FMI) and Myanmar Thilawa SEZ Holdings (MTSH), have been transferring existing shareholders from their physical share certificates to digital accounts.These will allow shareholders to trade their stock on the exchange, which they will be able to do within the next month, though neither company plans to issue new shares.

FMI shares currently trade at around K35,000 each, while MTSH trades at around K80,000.Interviews with the other four companies revealed that three of them – First Private Bank, Myanmar Citizens Bank and Myanmar Agribusiness Public Corporation – also have no plans to issue new shares. The fourth, Muse-based Great Hor Kham, will be the first to attempt to raise new capital in July.The company has hired KBZ Stirling Coleman to underwrite the deal, according to Great Hor Kham’s external auditor U Zaw Zaw Oo. However, the valuation and number of shares to be issued is still under review, he said.

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The company has around 50,000 outstanding shares.Meanwhile, four underwriters have started operations – KBZSC, AYAtrust Securities, CB Securities and Myanmar Securities Exchange Centre. All four are accepting new orders for customer accounts on the new YSX system.In addition to helping the six companies take their shareholder base digital, the underwriters say they are scouting for new companies that might be eligible to list.U David Soe Lin, managing director of AYAtrust Securities, said apart from MTSH, his firm is in discussions with eight other companies about a potential listing. Their target timeframe for launching an IPO is at least eight to 12 months, he said.“As it is a very thorough process, we will work together with our partner firms who have experience of stock markets in their own countries,” he said.Before considering an IPO, companies must hire a law firm to ensure compliance with legal requirements, make sure their corporate governance is of a suitable standard and write a prospectus, he said.

KBZSC director U Zaw Lin Aung said a number of new companies are being set up with a view to listing on the exchange. “It will not take much time for these companies to get their accounts in order, hopefully no more than six months,” he said. “Around 10 such companies have the potential to be ready for a share offering in this time frame.”Some of the underwriters plan to enter other related businesses such as private equity, while others plan to offer cash management services.KBZ managing director U Nyo Myint previously said the group also has ambitions on the buy-side. “We will try to enter the investment market as well,” he said.AYATrust will offer financing through its parent company AYA Bank, boosting capital levels at newly formed companies so that they are strong enough to list “as soon as possible”, said U David Soe Lin.

Asean Free Trade and Myanmar SMEs

ASEAN Economic Community (AEC), a common market with free movement of goods, services and labor across the 10 nations of Southeast Asia, is set to pose enormous challenges for small and medium-sized enterprises in Myanmar SMEs, experts say.

AEC has entered into force last January, however, Myanmar, Laos and Cambodia are not going to join the trade bloc until 2018. He left these economies underdeveloped ASEAN grace period to catch up with their developed counterparts. Yet, additional time may be insufficient.

Some of the challenges smaller companies in Myanmar face include the prices and the quality of the product compared to companies in Thailand, Malaysia and Singapore. Economists say the hardest races can kill small and medium enterprises weak in Myanmar.

“Myanmar would have to analyze the conditions of small and medium enterprises and their competitiveness before accepting with [AEC] system. Our local businesses do not meet the product quality [of others] and will not be able to make important market commissions , “U Tin Oo This, economist and specialist in law, he said.

The government has tried to implement the safeguard law to monitor commercial practices to reduce the number of obstacles to local small and medium businesses that are trying to compete with larger companies.

Under the law, if local Myanmar SMEs can not compete on the market and its production is reduced considerably due to free trade, imports of the same product would be prohibited for a specified period of time.

“Business owners may apply to do so by presenting the facts and evidence that imports of certain products has increased tremendously and that will impact on local businesses. The Ministry will investigate the product in question and a ban on import if deemed necessary,” Dr. Maung Aung, advisor to the Ministry of Commerce, said.

The government has started giving loans to shore up local SMEs, but the program has not been able to play a significant role.

“The government loan program for small and medium enterprises that lacks transparency and there is no favoritism involved. Prior to joining the ASEAN community, there were plenty of job opportunities in Myanmar, but after entering without doubt a great drain of skilled workers who will lose causing a shortage of local skilled workers, “said U Tin Oo Que.

Tin U Khine, owner of Shwe Kyar Pwint, a small shoe factory, also said that the loans granted by the Union government through state and local governments has not been very effective.

“It ‘was published in newspapers and magazines that have provided loans to small and medium-sized enterprises, but does not specify what kind of SMEs can receive loans,” he said.

“Shoes and slippers are imported from ASEAN countries such as Indonesia, the Philippines and Thailand and that are affordable and of good quality. There are also cheap shoes from China are mainly imported during the rainy season. The locally made Companies traditional slider may need to close if all these products flooding the market. ”

Dr. Than Tun, president of the Industrial Development Bank for small and medium-sized (SMIDB), said that 400 companies between 40,000 and 40,000 enterprises registered unregistered companies received the loan from the bank.

“While lending to small and medium-sized enterprises, must be analyzed carefully so that there is no loss. We appraisers to consider applications for loan. We estimate the value of collateral, which is different from region to region. On basic tests of guarantees, loans worth 20 to 40 percent is given the value of collateral, “said Dr. than Tun.

U Tin Oo, who said that the government should collect statistics on businesses across the country, sector by sector, and linking with foreign companies to allow the transfer of knowledge and technology.

Recently, consumer products, kitchen utensils, equipment for agriculture, livestock and fishery products originating in other ASEAN markets are imported into the local market and restaurants in Myanmar.

An official from the Myanmar fisheries and Exporters Association, who wishes to remain anonymous, said that while the ASEAN Free Trade pose obstacles for SMEs, the public will have more access to the best products at fair prices.

“Now imported meat and fish from neighboring countries is available in CityMart fair price shops. More competition means customers will have more choice and must pay even less,” he said.

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