Yangon Stock Exchange in Myanmar

Yangon Stock Exchange in Myanmar

Yangon Stock Exchange in Myanmar
February 25
08:00 2016

Not Long ago an official of a well-known public company said its share price had risen thanks to unreasonable rise of the market price of the land it owned. In fact, a share-price rise should correspond to the public company’s historical leadership and its improved perfor-mance only. Lately public companies have cropped up, making efforts to sell their shares. Some designated their company public and township-based, ostensibly open to any busi-ness. It would be dangerous to ignorant would-be share holders if the public company concer-ned has no definite prospectus, no transparent leadership except a self-appointed board of directors. Once some self-proclaimed public companies operated promising a monthly return to share holders. The scheme proved disastrous to share holder, especially pensioners among them. To prevent another disastrous repeat needs official regulatory procedures, which will help beget proper Stock Exchange listed public companies. Dr. Maung Maung Thein was recently interviewed to talk about the precautions taken and other public company particulars, as follows:

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Dr. Maung Maung Thein                                       Deputy Union Minister                                       Ministry of Finance

Why a need for stock exchange in Myanmar?
There are only nine countries without a stock exchange in the world, Myanmar is among them; North Korea and Burnei remain as such by tradition. The other six are small island-nations. The rest, if without a stock exchange, remain players connected to a stock exchange in another country. Myanmar and Brunei are now set to have one each.

Some public companies are not well formed. A bogus company, if permitted to sell shares, will prove very harmful to the share holder. So really well formed companies only will be permitted to sell shares.

How is a company judged for its wholeso-meness?
Internationally there are ten criteria for a company to be listed on a stock exchange. Yangon Stock Exchange also has them as a base. But, with Myanmar being an emerging market and appearance of all manner of public companies the criteria unavoidably became 17 in number. Then the criteria are oriented towards three major factors.

Would you please explain the Three …
Firstly we test a business for its soundners, or its Reliability, Profitability, in other words. We have prescribed that a would-be listed company must have had profitability at least for two years, which need not be consecutive. Then such a company cannot be no insignificant one. Secondly we check its corporate governance. Many companies failed because of corporate govermance. The 17 points I have touched on are the answer to whether corporate governance is good or bad. In brief, the checklist of 17 leads to an answer whether there is transparency or not.

Is the tenure of a would-be listed public company set?
Not at all. Prescribing two-year profitability automatically means the company must have been at least more than two years in operation, say, 3-4 years. No company is profitable for two years with two years in operation.

To what extent is leadership and management important in regard of reliability of a listed company?
Three factors are concerned with Corporate Governance. The implication is managers must not have been criminals, not blacklisted. It also means BOD members must not have been criminals, not blacklisted.

Please expand on Blacklist.
Blocklist is an institution, used by US, or a national government. For example, a Japanese may be engaged in a Myanmar bank but he might be blacklisted in Japan for bribery. He cannot operate there, but he is doing so in Myanmar.

Could it be required that a company moving to another city, when going public, must operate in partnership with the public compay already established there?
It could. Figures over 2 ½ years show more than 200 public companies in existence. Before 2011 with the advent of present government there were 38 public companies. Most public companies are unsound and public in name only. They are intent to capitalise with public money through shares. So public companies need to be scrutinized well before being permitted to issue shares. Another point is a need for their status enhancement. According to law, companies going public must firstly submit their prospectus to SECM (Stock Exchange Certificates Market) for permission to sell shares. Firstly we scrutinized City Bus Company and passed it. Later a company shall not sell shares without producing a prospectus. The second regulation is concerned with Securities Company (a.k.a) Service Providers. Ten such companies have been licensed to start their work. By current orders a company submits a prospectus, obtains an official permit, and may start selling shares just as soon. Later on were submission of a prospectus would not be enough. The 17 points we have already spelled out are rather stringent, especially because of the obligatory two-year profitability. So startups will be out of question. They cannot measure up to a Blue – Chip stock company with about inference 1 level. Later on a would – be listed company must produce a prospectus as well as be in conformity with the said criteria. Then they would not be able to deceive the public. A common trait found in most Myanmar companies is their lax care for Corporate Govermance and Transparency.

What Model is our stock Exchange follow-ing?
We are going hybrid. Fundamentally it could be called Japanese Model because of their help. Ours could be called a Hybrid because it is not wholly Japanese but contains touches most suitable to Myanmar taken out of neighbouring and other countries.

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Is present stock exchange local only?
It remains local at its start. Present company law says a Myanmar company even with one percent of foreign ownership will be deemed foreign company, so foreigners are not allowed to participate. But, for a stock exchange to really prosper forign players are unavoidable. If not so, it will be meaningless, like, taking money out of one’s own pocket. Capital increase must come from others. International business will come later. Currently company laws are being amended.

How to protect Share Holder?
Other countries have share holder protective fund, like insurance. Our plan contains such a fund. The share holder protective fund will be established when the stock exchange is up and running.

How much ROI (Return on Investment) would a Myanmar share holder would set to make investments?
It is impossible to predict because Myanmar Stock Exchange is completely new. By other markets’ trend the return at any stock exchange is found to average 10 – 12 percent, better than our current bank interest of 8 percent.Gains in some countries are astounding. For example, Microsoft shares over a tenure of 18 years increased by 50,000 times. In other words USD 10,000 worth of Microsoft shares at IPO fetched USD 3.5 million in 2007. A motto for international share holders is ‘Be Patient’. He should not sell just like many people are doing, but hold on to the shares with conviction. They are not perishable, but would go up in price one day. Panicked selling could prove disastrous to share Holder.

A little talk on listed public companies with a permit to sell shares
By rule we invited expression of interest from those among public companies willing to sell shares. At the same time we set conditions: The company must have had at least two years of profitability, and an investment of kyats 500 million and above. There are 10 applicants. Roughly speaking, all of them are not in very bad shape. If necessary, we could teach them Corporate Govermance with ease. The ten are in comformity with our conditions. We will check up on their functioning. At present about 10 percent out of 200- plus public companies in Myanmar seem to have a solid base and reliability.

What should a would-be share holder be mindful of on buying shares in a listed public company?
There are no specific laws. It occurs to me three things are important:1) who is in leadership. He could be the one most likely to misappropriate funds. A prospective share holder should study his biography in detail: 2) What is the company engaged in ? In IT era a company in IT would have a good prospect. If the leader knows nothing about IT, he is uselers to the company. Being no Pro in any thing won’t do. Lastly the times. You should study what is its trend, which way it is going. Applying these three won’t make for a bad decision in buying shares. Then the only need is: Be Patient.

By what sort of management will Yangon Stock Exchange be taken care of?
Yangon Stock Exchange will appoint three non- governmental outsiders for the posts of CEO, CFO and COO. Foreign or local, the appointee must have the qualities we appre-ciate. Not into finance industry deep, Myanmar appointees should be rare. Any appointee will receive a handsome salary comparable to the salary in private sector.

Once decided to buy shares in a listed public company, you may well consider:
– who is in leadership;
– what industry will the company be for;
– whether the company projects fit in with the trend of the times.

Translated by Khin Aung (English)


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