Myanmar Stock Market - A Hidden Gem to be Discovered
We are pleased to bring to you the special publication about Myanmar Stock Market. The motivation for us to be the first foreign research firm to cover this market in-depth is the well-said economic potentials and especially their recent policy development and ongoing execution of making its stock market investible for foreign investors.
YSX is still a tiny market with total Marcap of less than a half USD billion and illiquidity
• The YSX’s index MYANPIX reached a record high of 1,322.58 two days after the market’s launch at the base of 1,000 in early 2016. The index, however, lost more than half of its value over the course of its first two years before plunging to an historic low of 368.99 in early March 2019.
• The market cap of the YSX has fallen in parallel with MYANPIX, from an opening of MMK727.8bn (US$514.8mn) to MMK552.2bn (US$390.6mn) at the start of FY 2018/19.
• The YSX remains very small, inactive and illiquid in the context of no new listings since January 2018, the absence of professional investors, limited public awareness of equity markets and the lack of strong corporate governance. As of June 2018, there were as few as 100 active investors among around 30,000 account holders. At present, approximately 15% of total account holders are active per day on average.
Figure 1: YSX Index and Marcap since its Inception to date
A Hidden Gems? YES and NO!
• YES because Myanmar is a high growing economy, mostly thanks to the strong inflows of foreign direct investment and the penetration of multinationals i.e. Nestle, Coca Cola and VISA after the United States started easing sanctions in 2012. But NO because its political liberalization is still in question since the U.S. re-imposed its selective sanction on six Burmese military leaders and units, effective from July 2019.
• YES because Myanmar has many large private companies out of more than 63 thousand companies registered at DICA and there are only 20-30 companies prepared for listing in the coming years. But NO because there are a lack of information about such opportunities and a concrete plan with policy incentives toward having such companies go floating their shares on YSX.
• YES because foreign capital flow is expected after the 35% foreign ownership limit to be applied in practice from Nov 2019 but NO because there are various concerns especially from Western funds and asset managers about allocations into this market amid some targeted sanctions.
• YES because it is currently at the state of Vietnam Stock Market in 18 years ago. But NO because Vietnam had a very attractive policy framework for public companies in income tax exemption and reduction among other and Vietnam had many IPOs for State-owned enterprises while it is not so clear yet in Myanmar.
• YES because foreign funds from family-office investors and opportunistic money would flow in gradually despites the fact that managed funds may be not ready yet.
The 35% FOL applied for foreign investors and the said statement with more companies to go listing are being watched
The 35% foreign room under implementation
• In a notice on July 12, 2019, the regulator or the Securities and Exchange Commission of Myanmar (SECM), said foreign individuals and institutions would be allowed to trade shares of listed companies on the YSX.
• Before that, the new Companies Law, which came into force last August, made investment and business in Myanmar more attractive to non-Myanmar investors. The legislation allows both residing and non-residing foreigners to hold up to a 35pc minority stake in Myanmar companies without those firms losing the domestic registration required to be listed.
The expected list of 20-30 companies prepared for listing
• The YSX is expected to annually welcome five new listings in the coming years and this is likely to help improve the market liquidity and interest.
• Myanmar Agro Exchange Public Limited (MAEX) and AMATA Holding Public Co., Ltd. completed their IPOs and may be listed on the YSX in 2020. Yangon Bus Public Company Ltd. has not yet finalized its listing plan though its IPOs was done.
• Candidates include Mottama Holdings Ltd., Asia Green Development Bank (AGD Bank), the Myanmar Agribusiness Public Corp, Ever Flow River Group Public Company (EFR Group), Great Hor Kham, Myanmar Agribusiness Public Corp, & Maha Bawga Finance Co., Ltd.
• A number of other candidates said they want to wait until the market is up and running before they commit to an IPO.
Further reforms planned to open up economy more
• Real estate, retail and financial sectors, agriculture, mining, hotels and tourism, and energy sectors will be liberalized further to help Myanmar revitalize foreign inflows to spur the growth .
Figure 2: Companies Likely to be Listed Soon
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The domestic real estate market has had a period of strong growth in the past five years, will this bull market continue and support real estate stocks to lead the market?
Oct 09, 2018
Banking stocks have been one of the market leading ones over the years. FiinPro data showed that banking stocks enjoyed a 3-digit growth for the past five years, up 154.1% versus VNIndex’s double-digit gain of 96.5%. Will the attractiveness of banking stocks remain in the last months of 2018 and in 2019?