May 24, 2012

Central Bank adds further effort to securities exchange formation

THE signing of an agreement between the Central Bank of Myanmar and Tokyo Stock Exchange later this month will bring the country a step closer to the formation of a capital market, sources say.
“The Central Bank of Myanmar [CBM] will sign a memorandum of understanding with Tokyo Stock Exchange [TSE] and Daiwa Institute of Research Ltd at the end of this month regarding the establishment of a securities exchange and capital market. The signing will take place around May 29,” said a source close to the process.
TSE announced in April that it had reached an agreement with the Central Bank to sign the agreement.
Myanmar started developing a capital market in the 1990s as part of its transition to a “market-oriented economy” but the process quickly stalled for a number of reasons, most of which were related to the lack of a legal framework.
However, the source said that under the agreement TSE would help the government establish rules and regulations to govern the stock exchange.
“TSE will also help train local people on things like operating a stock exchange, formation of market design and the share trading system,” he said.
U Soe Thein, the executive director of Myanmar Securities Exchange, a joint venture between Daiwa Institute of Research and Myanmar Economic Bank, said that while the technical support of foreign partners was necessary there were still many issues that the country needed to address on its own.
“For example, we must finish enacting the Securities Exchange Law, its by-laws and other necessary rules and regulations. We must drive the formation of public companies; these are the core of a securities market,” he said.
“Private companies have started considering going public. But in practical terms, the current situation and business atmosphere are not favourable enough for going public.
“The mechanism for business company supervision is lax,” he said, adding that “loose” accounting standards led to widespread tax avoidance. “Companies like this have no chance to go public. The majority of our businesses are still also weak in terms of corporate governance and corporate culture. We must start solving these barriers.”
The TSE’s official website announced on April 12 that it would cooperate with the Central Bank to establish a securities exchange and support the cultivation of a capital market in the country.
“TSE will participate in the establishment of Myanmar’s first securities exchange, utilising its knowledge as a securities exchange with the world’s top-level of listed companies and trading volume. By providing its experience and technological expertise regarding the operation of a securities exchange market, TSE will work to create a fund-raising venue which is vital to corporate growth, while also focusing on investor education to promote market depth, and aiming to develop the securities market overall,” a message on the website said.
President and chief executive officer of Tokyo Stock Exchange Group, Mr Atsushi Saito, was quoted as saying: “Myanmar is a country with high prospects for capital market development and economic growth. We take great pleasure in concluding this MOU with CBM and beginning our support of the formation of a capital market.”
TSE will cooperate in the endeavour with Daiwa Institute of Research, which has been running an over the counter market in Yangon with state-run Myanmar Economic Bank since 1996.
Mr Takashi Fukai, president and representative director of Daiwa Institute of Research, said: “With our 15-year history of supporting Myanmar, we are delighted to have the help of TSE and CBM as we enter a new stage in the formation of the Myanmar capital market.
“DIR hopes to continue contributing to the establishment and future development of a capital market, utilising its strengths as the Daiwa Securities Group’s core information-generating arm, while also modernising Myanmar’s financial systems and promoting the spread of IT throughout the country.”

Source: Myanmar Times