Jun 7, 2016

Myanmar's Stock Exchange: Open For Business And Soon To Foreign Investors

Until recently, Myanmar remained the largest economy in Asia without a stock market. That changed this year with the introduction of the Yangon Stock Exchange (YSX), which just concluded its first two months of trading with the promise it will soon open to foreign investors.

Twenty years in the making, it has been a shaky ride for the nascent bourse, which launched without any stocks to trade in December 2015 as a final pet project of the outgoing government. Many observers questioned whether Myanmar — which endured decades of economic dysfunction and corruption — could even support a viable exchange.

But things seem to be looking up.

YSX now has two official listings and plans to add four more in the coming months. U.S. sanctions against its principal shareholder, the state owned Myanma Economic Bank (MEB), were lifted on May 17. The economy has been bolstered by a flood of foreign direct investment and is expected to grow robustly in the coming years. On June 1, the Securities and Exchange Commission of Myanmar announced it was preparing to allow foreign investors access to the exchange and local-foreign joint ventures to list.

Hopes are high that the stock market will become an important source of capital for Myanmar and provide new avenues of raising funds for companies. As of now, the country’s banking system remains weak and underdeveloped. The World Bank has called the lack of access to finance a major obstacle for growth in Myanmar and estimates that only about 3% of enterprises use banks for loans. Instead, local businesses tend to be self-funded and family-owned.

A successful stock exchange would be the first step in developing strong capital markets in Myanmar and could help convince the middle class and elites to move away from the tangible assets (real estate, gold, etc.) that they have traditionally favored and towards more dynamic forms of investment. It is a positive sign that the share trading 101 courses organized by YSX have already proven to be a hit.

Source: Forbes Asia