There won’t be any bell-ringing or celebratory confetti explosions when Myanmar opens its new stock exchange this week. There won’t be any stocks to trade either.
As Myanmar adjusts to the dizzying pace of its economic reforms and plays catch-up with Asia’s high-growth frontier markets, its bid to thrust a once military-run backwater into the global marketplace might be a little premature.
Most of the ten securities firms with conditional licences for trading and underwriting are not yet ready to operate, and when local companies do meet requirements to sell shares, foreign investors will not be allowed to buy them.
That means trading on the Yangon Stock Exchange (YSX) will at first be a wholly local affair in a country still getting to grips with new phenomena like smartphones, ATM machines and democratic elections.
Maung Maung Thein, the charismatic deputy finance minister in charge of the new bourse, described it as a “monumental achievement” that would help firms expand, and insisted Myanmar was not jumping the gun in launching the exchange on Wednesday.
“It doesn’t necessarily mean that at the opening day, trading must start,” he told Reuters in an interview.
“This is the right time. We’ve been an independent country 67 years and we have no stock market. If we do not start now, it will be too late.”
Myanmar’s military ceded power to a semi-civilian government in 2011, triggering a broad liberalisation of its fledgling economy that has attracted interest from foreign investors drawn by its 51 million population and largely untapped agriculture, mining and energy resources.
The private sector has, from a low base, thrived under the new political order, with speedy advances in sectors such as banking, tourism, textiles and construction, all of which are booming.
Thomas Hugger, of Asia Frontier Capital, said Myanmar was a high-growth target market and, if foreign restrictions were removed, his fund was “very interested” in well-run firms.
The YSX will technically be the second bourse after the barely known Myanmar Securities Exchange Center, for which share prices of the two listed firms were hand-written on a whiteboard for most of its 19 years of operation.
It is unclear whether or not this over-the-counter market will still operate once the new exchange starts trading.
Like much of Myanmar’s economy, the new electronic market has received Japanese expertise in setting up, with Tokyo bourse operator Japan Exchange Group and Daiwa Securities Group holding a combined 49 percent stake in the exchange.
“We believe the country will be opening up its economy and further develop capital markets,” said a Daiwa spokesman. “It is our role to support such an effort.”
One potential hurdle, however, is that the controlling 51 percent stake in the YSX belongs to the Myanma Economic Bank (MEB), which is among several lenders on the U.S. Department of Treasury’s list of sanctioned entities due to its ties to the former junta. That could pose problems for U.S. firms or funds interested in the exchange.
Maung Maung Thein was confident legislation would be changed soon to allow foreigners to buy equities and he said six “very good companies” had been selected to list.
He declined to name the firms, but predicted they would start trading by late February or early March.
Conglomerate First Myanmar Investment confirmed it wants to join the YSX. Its owner, Serge Pun, controls Singapore-listed developer Yoma Strategic Holdings.
Local media have reported interest in listing from Myanmar Citizens Bank, Asia Green Development Bank and Thilawa SEZ Holdings, which controls a new industrial zone jointly run by the government and a Japanese consortium.
Similar launches since 2011 in other Asian frontier markets have struggled to gain traction, with exchanges in Laos and Cambodia boasting four and three listed firms respectively.
Maung Maung Thein said Myanmar’s exchange would expand much faster.
“The economic potential is different,” he added. “We don’t compare.”
A source with close knowledge of the YSX project said there were huge opportunities in Myanmar, but the authorities were inexperienced and unrealistic about the trading timeframe.
“There’s nobody with any expertise and they’re expecting this to all happen almost overnight,” the source said. “This needs to be done properly. And they’re rushing it.”