YSE: Taking stock of future market potential

The Yangon Stock Exchange is slated to open later this year, but there is much to do until then.

Applications for service providers were due on March 6, one step in many that needs to be completed before the exchange can launch. The Myanmar Times’ Jeremy Mullins met with Dr Maung Maung Thein, deputy finance minister and chair of the Securities and Exchange Commission of Myanmar, on March 7 to discuss the road ahead for the YSX.

In the first place, why start a stock exchange? Isn’t it a little early for Myanmar to have an exchange?
That is a question often asked to me by so many critics. Actually it’s late. We have started late. All our neighbouring countries have their own stock exchange.

You might know the facts that there are 198 countries in the world. Out of 198 countries, only nine countries do not have stock exchanges. Out of the nine countries only three are traditional countries, they have a long history. The other six countries, are just island states, very small, very tiny.

So out of nine, three have a long tradition. Out of three, Myanmar is one of the countries. North Korea is another. Another is Brunei. Brunei is now trying to start a stock exchange. So why do you raise this question that we are very early to start a stock exchange? Our country has been an independent country for 67 years. Up until now we don’t have stock exchange. So I think the question whether it is too early for a stock exchange is ridiculous.

What about examples like Cambodia and Laos, where the stock exchange opened and nobody really showed up?
It depends on the country’s economic conditions. So Cambodia has a stock exchange, Laos has a stock exchange, but the size of the stock exchanges and the size of the economies are very small compared to Myanmar.

Myanmar’s economy has great potential. This is not said by me. This is said by a McKinsey report. That is why we believe we are not going to be like Cambodia or Laos, because economically speaking they are not comparable to us, they are small. We have great potential.

According to the McKinsey report, our economy will be four times greater in 2020. That means they made research in 2010. At that time our GDP was in the region of US$40 billion or so. But 10 years later our GDP will be more than $200 billion. It is not said by me, it is said by a McKinsey report.

Nobody questions that the economy has lots of potential, but people are worried there are not enough companies to list.

That is a very wrong statement. Because we have now in a very short time over 200 public companies. Not all of them are qualified enough to be listed, but out of 200 we now have qualified companies in the region of 10. That is [the] failsafe. Because you know very well some of our public companies have been selling their shares for so many years.

For example First Private Bank has sold their shares for 20 years. They are doing very well. Same with FMI and other public companies.

And if we describe the criteria for public companies, all of our public companies will make themselves meet that criteria. In this way they will become qualified companies.

The stock exchange is opening in about six months. Is that enough time?

The stock exchange is not a one-year or two-years business. Look at New York Stock Exchange. It is now over 200 years old. We can start with five companies, 10 companies, no problem, this is just the beginning. Later on, there will be more qualified companies and the stock market will be more developed.

Can you talk about the Securities and Exchange Commission of Myanmar? Who heads the SECM, who sits on it and how is it composed?

The SECM is chaired by me, and we have six members, composed of various experienced staff, and the most important thing is we have technical assistance from Japan’s Ministry of Finance.

Is it the SECM that will be evaluating the underwriter, broker, dealer, consultant bids? Can you elaborate? How many bids were received?

We have called for applications for four kinds of licences. They are all service providers. The first is underwriter licence. The second is dealer. The third is dealer. The fourth is advisory licence.

The last day for the application was [March 6]. So far we have received 57 applications. Out of 57, we received 20 applications for underwriter, two for dealers, five for brokers and 30 for advisory. That’s a very good number to start with.

Do you know how many will eventually receive licences?
We cannot say for sure. We have to scrutinise their applications. Those who are well qualified will be chosen.

Can you talk about foreigners and what role they can play? Can foreigners buy stocks or be an underwriter on the YSX?

We allow joint ventures in service provider licences – underwriters, brokers, dealers and advisory.
Why not allow foreigners [fully] into the exchange?

It’s very clear. If we allow 100pc foreigners, there will be no place for our locals. That is why we just allow joint ventures to work together with foreigners and to learn. When our people get enough knowledge we will allow foreigners.

From the opposite point of view, [for listing companies] don’t foreigners really have the expertise and the capital that could really help the exchange especially in the early years?

For listing companies we have a strategy. First we will allow only local companies to be list. Later on if our company law has been changed we will allow [foreign-local] joint ventures. And later on third stage will be state-owned economic enterprises. We will corporatise them and list them in the stock exchange.

This is a few years away. Currently we could not allow [foreign-local] joint venture companies to be listed because our company law does not allow it so we are trying to rewrite the company law.
The timing seems a little strange. Why do it [open the exchange] at the end of 2015, the same time as the election?

We want to [get something started], that is why. If possible I was appointed as deputy minister in the year 2012. I wanted to start it in the year 2012, but that is not possible, it takes time. At least four years to start the stock exchange. That is why 2015 we targeted as the year to start the stock exchange, because the stock exchange cannot be started overnight. It took four years.

Source: Myanmar Times

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