Yangon’s Stock Exchange in Comparative Analysis

Abstract

In the political sphere, the citizens of Myanmar have witnessed and taken part in an expanding and deepening process of democratization and political liberalization in the past few years. In the economic sphere, changes are also underway that indicate a growth of economic liberalism. One part of that process is a slowly increasing financialization as indicated by the new Yangon Stock Exchange (YSX) set to begin trading operations in late 2015.

This paper will analyze what this new stock exchange means for the citizens of Myanmar by placing it within a regional comparative analysis of stock markets across Southeast Asia, including the Ho Chi Minh City Stock Exchange (HoSE), the Hanoi Stock Exchange (HNX), the Lao Securities Exchange (LSX), and the Cambodia Securities Exchange (CSX). The main argument is that despite calculable risks in terms of business transparency and national politics, the potentialities for a successful YSX are in place. The main socioeconomic conditions that warrant investment, both from the domestic as well as international perspective are 1) the depth and diversity of Myanmar’s adult population size, 2) Myanmar’s rallying industrial sector, 3) Burmese businesses’ current lack of bank financing, and 4) Burmese citizens’ little-to-no holdings in financial assets as compared to other non-financial wealth holdings.

The YSX will not be an overnight success for either domestic Burmese investors or for domestic Burmese enterprises seeking new avenues to finance growth and project investment. However, the systemic socioeconomic conditions are in place for the Yangon Stock Exchange to parallel more closely the experience of the Vietnamese HoSE and HNX than that of the other Indochinese exchanges of LSX and CSX.

Keywords: Yangon Stock Exchange, YSX, Myanmar, political economy, finance, wealth

Introduction

For the first time in its nation’s history, Myanmar will soon possess a full-fledged, independent, and computerized national bourse: the Yangon Stock Exchange (YSX). Though a late start has already been announced, a visit to the neoclassical Palladian building on the southeast corner of Sule Pagoda Road and Merchant Street in Yangon, where the old Reserve Bank of India used to issue banknotes during the 1940s, allows one to see the hustle and bustle of construction and renovation—all evidence that a stock market is indeed going up. Entering from the front stairs and into the center of the building, one sees a large square pit in the center of which will be placed a massive LED screen to display trading activities. To the left, a glass-paneled conference room for future investors is being built, whilst to the right, small rooms to be rented for representatives of underwriters, brokers, and advisors are being partitioned. The press corps will also have their own spot in the balcony. And to the very far right, one sees the shell of a future coff ee shop meant as something of a historical tribute and “for good luck since the world’s oldest stock exchange was in a coffee shop.”

But then again, this is just a building. Though it is a good sign that there is active construction, there is nothing here that suggests at first glance that the Yangon Stock Exchange will be a success. Two other grand-looking buildings in Southeast Asia also house exchanges—these are the Lao Securities Exchange (LSX) off Kampheng Meuang Road in Vientiane, Laos; and the Cambodia Securities Exchange (CSX) along Preah Mohaksat Treiyani Kossamak in downtown Phnom Penh, Cambodia. However, neither of these bourses are, by any standard definition, successful stock exchanges. What might indicate that the upcoming YSX will be different?

To varying degrees, other more successful stock exchanges can be cited in Southeast Asia. Examples include, from newest to oldest: the Hanoi Stock Exchange (HNX); the Ho Chi Minh Stock Exchange (HoSE); the Indonesian Stock Exchange (IDX); the Stock Exchange of Thailand (SET); the Singapore Exchange (SGX); Bursa Malaysia (MYX); and the Philippine Stock Exchange (PSE). The two exchanges in Vietnam, unlike the neighboring LSX and CSX, are the best example of stock exchanges begun in the twenty-first century that are performing at, and in some ways exceeding, what a successful stock market exchange means for a developing country in Southeast Asia. The HNX and HoSE have become invaluable to both companies and investors of the capital market in Vietnam. What might indicate that the exchange in Yangon will follow the example in Vietnam as opposed to the one in Cambodia or Laos?

This article contends that despite the many challenges facing the introduction of a new stock exchange in Myanmar, the Yangon Stock Exchange will likely have more in common with… [click here to continue to read full text]

*Originally published in Journal of Burma Studies by T. F. Rhoden; image-photo credit for this post via Frontier Myanmar. Unless otherwise stated, all posts on this website are under Creative Commons licence. 

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

…Still, Myanmar had no market infrastructure to speak with, so Daiwa brought in the Japan Exchange Group as a partner, while the Japanese Ministry of Finance helped the Myanmar government draft up a new law to set up the creation of the bourse. According to Masutomo, JPX’s interest in Myanmar was due partly to the fact the Korean Stock Exchange, which had helped set up the Lao and Cambodian exchanges, was so ahead of them in the region.

Today, however, the Lao and Cambodian bourses are seen as a cautionary tale of what the Burmese exchange could become. Skeptics argue that YSX will likely mimic the fate of its neighbors, which both failed to take off after debuting to much acclaim. Each now holds less than 5 stocks.

For T. F. Rhoden, an independent researcher and doctoral candidate at Northern Illinois University, the comparison is misguided, as Myanmar’s population of 54 million people gives it a potential depth of domestic investors that’s much more comparable to Vietnam than Laos or Cambodia. In addition, Myanmar’s $64 billion economy is over three times the size of its smaller neighbors.

The more important lesson from the Lao and Cambodian exchanges is that their failure to enforce strong disclosure procedures and regulation destroyed their credibility. For emerging markets — whether in Asia or elsewhere — the need for international standards of accounting and disclosure is more than ever crucial.

The Yangon Stock Exchange has tried to push for higher standards by asking applicants to appoint compliance officers and set up systems to prevent insider trading, but without stringent regulation of the capital market, it likely won’t be enough.

“The two companies that have listed so far are… [click here to continue to read full text]

*Originally published in Forbes by Fanny Potkin; photo image credit via WTOP. Unless otherwise stated, all posts on this website are under Creative Commons licence.

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Myanmar Needs to Forgive Tax Dodgers

Whether motivated by greed or virtue, granting a one-time tax transparency amnesty to past evaders will help the country’s economic and political transformation.

With the new Yangon Stock Exchange (YSX) set to open in less than five months, now is good time to reflect on, not just the political liberalisation of Myanmar away from military authoritarianism and towards democratisation, but also on the evolution of the economic sphere.

And in particular, increased transparency.

A successful national bourse requires more than a modicum of transparency. “Transparency” itself can mean more than one thing. Openness to outside investigation, whether it be a corporation’s financial statements or a government bureau’s budget, can be a good thing or a bad thing depending on the situation.

However, I argue that there is more good to be had — that is, not just more economic efficiency or effectiveness, but genuine honesty in the development process — if something like a “tax transparency amnesty” for domestic businesses in Myanmar were promulgated by a democratically elected parliament.

We all understand that “politics” and “money” often intersect, particularly at the commanding heights of a national state. Some manifestations of the politics-money nexus are useful whilst others are more than a little depressing; but there is one avatar in particular that is a scourge on Myanmar’s political economy. A tax transparency amnesty could prove analgesic to that still lingering sick-man of Myanmar’s economy: the crony capitalist.

If cronyism between government and businesses is one type of economic activity that could use a dose of transparency, Thomas Fuller’s recent piece in the New York Times is a dismal reminder of another kind of less-than-ideal investor-backing for some of Myanmar’s corporate entities. Illicit trading of items like poppy (now often as methamphetamine), timber, and precious stones are hidden on the former balance sheets of more than a few companies. A tax transparency amnesty could prove useful here as well, helping to highlight wealth and income that is more or less clean (though underreported in the past), whilst also reasserting the illegality of some commercial goods.

But what exactly is a “tax transparency amnesty” and how would it work?

A tax transparency amnesty would be a one-time opportunity for businesses and individuals to declare past hidden income or wealth for an agreed upon fee. Regardless of where the funds came from, all money in the system would be declared white: everyone would get a clean set of books.

The one-time fee would probably be a… [click here to continue to read full text]

*Originally published in New Mandala by T. F. Rhoden; photo credit goes to Dustin Main. Unless otherwise stated, all posts on this website are under Creative Commons licence. white-compass-rose-th