Stock Trading Down, But Investors Remain Interested

The Myanmar Stock Price Index tumbled 23 points, or around 4.7 percent last week, closing Friday at 463.70, after officials from the Directorate of Investment and Company Administration (DICA) said the new Myanmar Companies Law would take at least another 8 months to implement.

The new law, which replaces the existing 1914 Myanmar Companies Act, brings the country’s  corporate legislation on par with its more developed neighbours.

One of the major issues of implementing the new law though, is a clause in the legislation allowing foreigners to take up to a 35pc share in local companies, including companies listed on the Yangon Stock Exchange (YSX). If implemented, the move would pave the way for greater liquidity on the exchange and encourage many more companies to list.

Despite the setback, foreign investors are already keeping a closer watch on YSX developments. Scott Osheroff, regional research analyst at Asia Frontier Capital, which invests in public listed companies in Asian frontier countries, is one such investor.

“The passing of the Companies Law is a step in the right direction. After it comes into effect the next step would be for the YSX and the Securities and Exchange Commission of Myanmar (SECM) to establish a mechanism enabling foreign investors to invest into companies listed on the YSX,” he said.

“It is paramount that the YSX and securities regulator creates a mechanism to enforce foreign ownership limits which are straight forward and effective. Otherwise they risk deterring potential foreign investors and simultaneously risk seeing local companies refraining from listing as there would likely be a continued lack of liquidity,” he added.

For now, Mr Osheroff sees value in just one local stock -Myanmar Thilawa SEZ Holdings (MTSH), which listed on the YSX on May 20, 2016. “MTSH is attractive because it is the largest SEZ in Myanmar at 2,400 hectares, which gives the opportunity for hundreds of factories to eventually set up,” he said.

And, even though MTSH holds 41pc of the Thilawa SEZ, Myanmar’s first fully functional Special Economic Zone, it currently trades at just 5.8 times its earnings and has a dividend of 8.3pc.

“As more manufacturers continue to come into the country many will be attracted to Thilawa and the other income streams from the selling of commercial and residential land in the zone should provide MTSH with the ability to pay out a relatively consistent and attractive dividend over the medium term,” Mr Osheroff said.

In the meantime, all eyes will be on DICA, the SECM and other relevant authorities as they attempt to implement one of Myanmar’s most anticipated legislations. While investor confidence appears to be waning of late, U Than Aung Kyaw, Deputy Director General of DICA, sent out a positive message at EuroCham Myanmar’s second Business Confidence Survey launch last week

“When we enacted the new Investment Law last year, we granted investors different levels of tax exemption depending on sector and type of investment. We also allowed the Myanmar Investment Commission to approve investments in the various states and regions and created new industrial zones and promoted sectors,” he said.

While it will take an additional 8 months at least to fully implement the new Companies Law in a transparent and comprehensive way, U Than Aung Kyaw said the government is determined to make the new legislation a success.

“With both  the Investment Law and Companies Law in effect, I think that in a year or two, the business environment in the country will be at its best,” he said.

 

Source: Myanmar Times

 

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