Cautionary tales for Myanmar's new exchange

Myanmar's eagerness to build up the new Yangon Stock Exchange may remind observers of what happened in three nearby markets - for better or worse.

You don’t have to look far from Myanmar to see the dangers of a pre-emptively launched stock exchange.

The country's outgoing, military-led regime wants to see the first companies list on its new Yangon Stock Exchange before handing over power to an elected government at the end of March, but faces a struggle, with companies seemingly ill-prepared for a listing.

The experiences of three neighbouring countries might offer food for thought.

In 2011, Laos launched its bourse with two listed stocks: Banque Pour Le Commerce Exterieur Lao and EDL-Generation. Neighbouring Cambodia followed the next year with its bourse and just one stock, the Phnom Penh Water Supply Authority.

Today, Laos’s exchange just has four listed stocks, while Cambodia’s boasts three.

Investors blame this pathetic outcome on factors including listing of the wrong companies and poor corporate governance. But the fact remains that a potential source of capital has been stymied for both nations.

It’s not a hugely dissimilar story in Vietnam, which launched the Ho Chi Minh Stock Exchange in the 1990s with only two stocks. Even today the bourse is quite thinly traded, in part because the largest state companies have only floated tiny slivers of their equity capital.

“Vietnam opened the Ho Chin Minh Stock Exchange with two stocks [in 2000] and everyone laughed; when we opened with none here, everybody sniggered,” one private equity executive.  

Takashi Takahashi, deputy director for Myanmar Securities Exchange Centre, is aware of these issues, but hopes Myanmar can at least emulate the limited achievements in Vietnam.

“My government wants the stock exchange to follow [the bourse of] Vietnam, not Cambodia or Laos, which were failures,” he said. “But we need many listed companies so investors can sell one share and buy another. We need 10, 12, or 15 listed companies.”

Other observers question the wisdom of launching a stock exchange before encouraging more loan products, an interbank market, or a corporate bond market.

“I’m not sure it’s necessary to have a stock exchange in the early development of a frontier market like this,” was the view of a foreign banker working in Yangon. “There are very few emerging market frontier exchanges that are very relevant [to the development of their economies].”

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