[FiinGroup] Myanmar Stock Market - A Hidden Gem to be Discovered

Myanmar began its economic reform only recently in 2011. Despite many remaining risks and challenges, Myanmar is well on its path to liberalization, growth and development. Myanmar Stock Market is also not far from its nascency, and its numbers and indicators are quite modest. However, with the coming changes, the market would be expected to boom, creating precious opportunities for those who pay a close look and willing to be an “early bird” investor.

FDI influx after the reform has largely contributed to the economic development of Myanmar. People are expecting the financial investment capital to follow

Reforms, FDI Influx and Economic Performance

• From 1988-2011, Myanmar was under military rule. It permitted modest expansion of the private sector while allowing some foreign investment. The economy was rated in 2009 as the least free in Asia (tied with North Korea). All fundamental market institutions were suppressed. Private enterprises were often co-owned or indirectly owned by state.

• In 2011, when new President Thein Sein's government came to power, Myanmar embarked on a major policy of reforms including anti-corruption, currency exchange rate, foreign investment laws and taxation.

• In November 2012, President Thein Sein signed Myanmar’s new Foreign Investment Law. This law oversees unprecedented liberalization of the economy. For example, it stipulates that foreigners no longer require a local partner to start a business in the country and are able to legally lease land.

• In December 2017, President U Htin Kyaw approved the new Myanmar Companies Law. The new law modernizes company formation and management and revise corporate governance in Myanmar. Notably, it allows foreign investors to hold up to 35% of shares in a domestic company without the company losing its classification as a “local company” instead of requiring 100% local ownership as before.

• Since the beginning of the reform, both Myanmar’s GDP growth and FDI have been steady despite certain ups and downs.

• The risks and challenges may be many, but the opportunities are greater. Young demographics, cheap labor costs, huge untapped domestic consumption and geographic advantage, coupling with continuing reforms and opening up of the economy, make Myanmar well positioned on its path to growth and development.

Prospects

• The country will see steady growth in the next few years as an acceleration in the reform agenda has buoyed sentiment. According to forecast by the WB, Myanmar’s real GDP will grow by 6.5% - 6.8% annually in the period from 2018/19 - 2020/21.

• Together with economic performance and reforms, the government’s efforts to standardize FDI application and implementation procedures will lead to an increase in foreign investment in Myanmar.

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