May 6, 2012

Japan firms to help create Myanmar bourse

Myanmar, the so-called last frontier for business opportunities in Asia, will be establishing a stock market by 2015 with the help of Japan's Daiwa Securities Group Inc. and Tokyo Stock Exchange Group Inc.
Many Japanese and foreign investors believe that the envisaged stock market will open up numerous business opportunities. At the same time, however, some experts have pointed out that after five decades of the isolation from the global community, Myanmar's transformation from a pariah state to a modern economy will not be quick.
"We are very proud of joining the national project," said Ryota Sugishita, an executive director in charge of consulting for Asian capital market development for Daiwa Institute of Research Ltd. "And we are eyeing joining in the country's securities business in the future."
Daiwa, TSE and the Central Bank of Myanmar reached an agreement April 11 to set up a stock exchange by 2015 and help grow a capital market. They are likely to sign a contract as early as this month, according to the two Japanese groups.
The move is in line with Myanmar's attempt to bring its economy on par with neighboring countries.
The plan to set up a stock market by 2015 comes the same year as the Association of Southeast Asian Nations plans to integrate their economies to create the ASEAN Economic Community. In the planned integration, ASEAN countries would do away with trade barriers and promote cross-border investment within the community.
Meanwhile, the Tokyo bourse is expecting future benefits by helping Myanmar to open its stock exchange.
"We hope our support will lead to more active trade on our exchange," TSE spokesman Naoya Takahashi said. For example, the TSE hopes to build a broader tieup with Myanmar's stock exchange by listing financial products on each other's markets or exchanging stock price information.
"For TSE, it is a long-term story, rather than a short-term business chance," Takahashi said.
Such support would be part of a number of steps taken by the Tokyo bourse, which cooperates with more than 20 exchanges around the world, including in New York, London and Shanghai, to survive fierce global competition to lure more investors and corporate listings.
Under the agreement, Daiwa will be in charge of helping the country nurture a capital market through various measures, including the training of the stock exchange's workforce and giving advice to set up IT systems necessary in the securities business. TSE will help establish rules and standards to operate a stock exchange.
Daiwa said the company's approach to the country dates back to the early 1990s.
The firm's initial interest in Myanmar's capital market was welcomed by the government in 1993, which led to Daiwa's official contract with the country to help set up the Myanmar Securities Exchange Center Co., an over-the-counter stock market, in 1996.
Daiwa plans to use its knowhow and personnel resources at the MSEC to create the new stock exchange.
Global interest in Myanmar stocks has grown recently as the country opens up its economy and the U.S. and Europe begin lifting their strict sanctions.
Renowned U.S. investor Jim Rogers said in an April 2011 Forbes interview that if Myanmar opens a stock exchange, he would buy shares there "in a minute."
But the fledgling democracy faces many challenges, because it needs drastic reforms to improve its overall financial system.
The first key task it faces is to create various regulations. These include stock-trading rules for the exchange, financial requirements for stock listing and financial disclosure standards for shareholders.
What's more, the underdeveloped economy, often suspected of being a hotbed for money-laundering, is sorely lacking modern financial infrastructure -- including crucial Internet technology -- for transactions, money transfers and settlements.
Currently, only cash and checks are available for settlements at the MSEC, the tiny over-the-counter market. ATMs have only just been introduced at the country's banks, and credit cards can barely be used.

Source: Chicago Tribune