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.”

YSX Second Stock Exchange Listing Jumps 25% on First Day

The share price of Myanmar Thilawa SEZ Holdings Limited (MTSH) rose 25 percent during its first day of trading on May 20 after the company became the second to list on the Yangon Stock Exchange.

After launching at a base price of K40,000, the share value quickly reached its upper limit, closing the day at K50,000. Demand outweighed supply by more than 100 times, with bids totalling almost 600,000 shares, officials said.

The company listed 3.9 million shares but did not raise any new capital. Securities house CB Securities, which led the deal, valued the company at K40,500 according to an announcement last week.

On May 20 the YSX also unveiled a new index – Myanmar Stock Price Index, or Myanpix – which will represent price moves in the market. It is weighted according to market capitalisation, meaning that moves in larger companies will carry greater weight.

Officials from the newly listed MTSH said on May 20 that they plan to cut shareholder dividends this year, to invest more capital into their flagship project, a special economic zone in Thilawa, near Yangon.

The company, established in 2013 by a nine-shareholder consortium, paid a 20pc dividend on the par value of its shares last year, or K2000 for each share.

In early 2014, over-the-counter shares were sold for K10,000 each.

MTSH makes most of its income from two subsidiaries. Myanmar Japan Thilawa Development manages the marketing, sales and operations for the first stage of Thilawa SEZ, Zone A, while Thilawa Property Development, set up in early 2015, handles the construction, sale and management of residential and commercial areas.

This year, MJTD will reinvest its profits into the project’s second phase, Zone B, according to company documents.

“We will need more capital over the next two years once we have started work on Zone B, perhaps as soon as the end of this year,” said MJTD chair U Thurane Aung. The board has not yet decided whether to raise new capital through the exchange or take out a loan, he said.

Zone A has been a success, he added, with around 86 percent of its 400 hectares already sold. Zone B will cover 7000 hectares including an industrial zone.

“We can reach our target profits if the market, foreign investment and policy does not change too much,” he said.

At the stock exchange launch, MTSH chair U Win Aung urged caution when buying his company’s shares. “Our securities companies have come up with a realistic [valuation]. We want investors to make sure they understand, and not to buy shares with urgency.”

Demand for shares in First Myanmar Investment, which listed on the exchange last month, picked up on May 20 and the company saw its share price jump 17pc to K31,000.

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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.

Related : Myanmar is about to launch trading on new Exchange

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.

Related : Myanmar Second Stock Listing MTSH delay to list YSX

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.

Read Also : Myanmar Second Stock Listing MTSH delay to list YSX

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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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.