Foreign Investors starts to trade on Yangon Stock Exchange soon

The Securities and Exchange Commission of Myanmar is preparing to allow foreign investors to access the new Yangon Stock Exchange and for local-foreign joint ventures to list, chair U Maung Maung Win said.

An “appropriate” number of joint venture companies will be given permission to go public as soon as the new Myanmar Company Registration Act is passed, while institutions from overseas will be invited to invest to encourage market liquidity, he told The Myanmar Times.

The law is expected to be passed this year, he said. “This is beginning of the journey. Every step is not easy in the initial stages; we will need international assistance to develop the market.”

Electricity and Energy merger complete

A merger between the ministries of electric power and energy, ordered by the new government in March, is now complete and the new structure will be submitted to the cabinet for approval, officials said.
Permanent secretary U Htain Lwin said yesterday that operational changes and job cuts have been minimal.

“There are no big changes in the merger. The day-to-day operations of our ministry will continue as usual,” he said.

Burmese Lists in Panama Paper

The world’s largest data leak – the Panama Papers – has revealed a secretive network of offshore jurisdictions used by some of the most wealthy to stash assets, subvert sanctions, launder money and evade taxes. An extensive database detailing companies and business people involved in the leak holds 16 names from Myanmar, including CB Bank chair U Khin Maung Aye and former dictator U Ne Win’s son-in-law U Aye Zaw Win.

Yangon Stock Exchange needs experienced investors

The Yangon Stock Exchange needs larger and more experienced investors to start trading as its current buyers lack experience, industry sources said at an Oxford Business Group capital market debate last week.

The individual traders dominating the new bourse – also called retail investors – are poor at assessing a company’s financial health, analysing cash flows and determining the fair value of shares, sources said at the May 5 event.

Institutional investors, such as banks or insurance firms, are typically more sophisticated, better able to assess risk and trade larger amounts. It is this class of investors that the YSX needs, industry sources said.

First Myanmar Investment (FMI) became the first firm to list on the YSX on March 25. Trading volumes soared, with over 140,000 shares changing hands on March 29 alone. But the market has since cooled – just over 6000 shares were traded on May 6.

A market dominated by retail investors can be problematic. Those buyers may treat investing as “gambling”, said Amara Investment Securities director Neville Daw, adding securities companies must educate their clients about basic practices like share valuation.

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FMI first listed its shares at K26,000 and watched their value climb to K41,000 in less than a week. But the shares have slowly crept back toward their listing price, and closed at K28,500 on May 6.

YSX director U Thet Tun Oo agreed that some investors were likely treating investing as gambling. But YSX regulations that restrict trading volumes and price movements prevent “dishonest trading”, he said.

Foreign buyers are a potential source of institutional investment, but foreigners are not allowed to purchase shares on the YSX. Once the Myanmar Companies Act has been passed it will be possible to admit foreign buyers, although with set limits, said U Thet Tun Oo. The revised legislation will go before parliament this year.

Thura Swiss CEO U Aung Thura said the country’s new bourse needs a professional class of institutional investors. But finding candidates in the local market may prove difficult.

Public or private sector entities like insurance companies or pension funds could potentially invest on the YSX, although as private insurance firms were only established in 2013 they lack the excess funds to make investments, he said.

Some six or seven securities companies have recently started operations. Those with underwriting licences are allowed to buy shares for their own trading purposes, but most are only doing so for clients because few firms plan to undertake initial public offerings, he added.

U Zaw Lin Aung, director of KBZ Stirling Coleman Securities, said that securities firms were waiting for the market to become more liquid before they started to invest.

“We’re still waiting as demand seems low at the moment,” he said.

Industry sources are expecting trading volumes to increase when Myanmar Thilawa SEZ Holdings Public Ltd lists later this month. That firm received permission to list on May 6, and will become the second firm on the YSX on May 19, according to a YSX announcement.

An official from the Securities Exchange Commission said he is hoping that 10 or more companies can list this year. There are four companies already engaged in the listing process, he said, noting other public firms would be applying for permission.

As of May, the Directorate of Investment and Companies Administration lists around 200 public companies. A new over-the-counter market is in the works, which would provide an exchange for firms that do not meet the YSX listing criteria, U Thet Tun Oo said.

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Myanmar is about to launch trading on new Exchange

Trading on Myanmar’s new exchange has launched, with only a single stock appearing on the board.

Trading on the Yangon Stock Exchange (YSX) opened March 25 with a single firm – First Myanmar Investment (FMI), a holding company operating in the financial services, real estate and health care sectors, debuting on the exchange.

FMI did not issue any new shares in its float, instead transferring its existing stock, which had previously been available through over-the-counter (OTC) trading, to digital accounts.

Early exchange fluctuations

Early trading in FMI’s shares saw a high degree of volatility, with strong gains in the first few days offset by subsequent declines. Having opened with a market capitalisation of MMK610bn ($515m), FMI saw its valuation rise to MMK845bn ($717m) before slipping somewhat on profit taking.

Ahead of the opening of trading, Serge Pun, chairman of FMI, said he was confident that, given time, the YSX would mature and develop.

“We are, in a way, fortunate being a late starter in developing a capital market, in that we can adopt the key success and avoid the failings of others in front of us,” he told regional media in March.

The development of Myanmar’s capital markets will offer alternative access to funding for companies, according to Linus Goh, head of global commercial banking and executive vice-president of Oversea-Chinese Banking Corporation.

“The establishment of the YSX will eventually offer equity-related or quasi-debt financing options, although its initial opening will be more symbolic than substantive in terms of offering a channel for Myanmar-based companies,” he told OBG earlier this year.

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The YSX is 51% owned by the Myanmar Economic Bank (MEB) and 30.25% owned by Japan’s Daiwa Securities, with the remainder held by the Japan Exchange Group.

MEB and Daiwa are also partners in the country’s only other capital market, the Myanmar Securities Exchange Centre (MSEC), which was established in 1996. To date the MSEC has gained little traction, with just two equities listed. Expectations are higher for the YSX, however, with additional firms expected to list in the coming months.

More looking to be listed

A second firm, Myanmar Thilawa Special Economic Zone (SEZ) Holdings Public, a shareholder in the Thilawa SEZ, is set to list early in the second quarter. Like FMI, the company has said it does not intend to raise additional capital through its float, instead planning to transfer existing OTC shares onto the exchange.

Another four companies – First Private Bank, Great Hor Kham Public Company, Myanmar Agribusiness Public Corporation and Myanmar Citizens Bank – have been given approval to list, though none have set a date for their formal float.

If all four list, it will give the YSX a heavy emphasis on financial sector stocks, with half the companies from the financial services industry.

According to local media, Great Hor Kham Public Company may be the only firm looking to raise new funds through an initial public offering. The company has tentative plans to list in mid-2016, with licensed securities firm KBZ Stirling Coleman acting as underwriter.

Future IPO candidates

At the end of March the Securities and Exchange Commission of Myanmar (SECM) announced it is creating an OTC trading platform for companies on the path toward listing, helping promote a culture of equity investment and trading.

“New companies cannot enter the stock market as they don’t meet the criteria. They can sell their shares at the OTC market systematically,” Maung Maung Thein, chairman of the SECM, said following the launch of trading on the YSX.

Prior to the creation of the exchange, some 60 companies’ shares were traded OTC, including most of those planning to list on the exchange in the first round.

Not only is the commission laying the groundwork for new listings, but licensed underwriters are also probing the market for potential IPO candidates.

AYA Trust Securities, one of 10 firms approved by regulators to provide underwriting services on the exchange, is in talks with eight companies regarding possible listings, David Soe Lin, managing director of AYA Trust, said in early March.

“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, adding it could be eight to 12 months before any of the firms were ready to list, as all regulatory requirements had to be met.

The boards could get more crowded still in 2017, making the YSX more representative of Myanmar’s expanding economy.

Reference : Myanmar Business Today

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