Forgotten securities market eyeing revival
August 29 - September 4, 2011
Top: An employee at the Myanmar Securities Exchange Centre on Sule Pagoda Road updates business information on a whiteboard.
Pic : Aye Zaw Myo
A little-known fact about Myanmar’s business sector: On the second floor of the Myanmar Economic Bank headquarters on Sule Pagoda Road in downtown Yangon, you can purchase shares in publicly listed companies.
Formed in 1996 as a joint venture between Myanmar Economic Bank and Daiwa Institute of Research from Japan, the Myanmar Securities Exchange Centre (MSEC) is hardly Wall Street: It has two listed companies – Forest Products Joint Venture Corporation and Myanmar Citizens Bank – and a total of seven employees.
“We are still working with Daiwa Ltd and now we have two listed companies,” said a spokesperson from the exchange centre, declining to give any more information.
Most of the 10 or so public companies in Myanmar were formed in the early 1990s, after the military government initiated some limited economic reforms that opened up the economy to investment from both local and foreign sources.
The financial securities market has grown only slowly since then; so slowly, in fact, that most people have forgotten the market exists at all. The reasons are unlikely to come as a surprise: With transparency a principal requirement for public companies, most state-owned enterprises and privately run businesses have accordingly shunned the option of listing, viewing it as incompatible with running a successful company in Myanmar’s business climate. Public companies must be accountable to both shareholders and the tax department, while taking a private company public means divesting not only shares but also some degree of control.
Above from left: Workers at stock exchanges in New York, Tokyo and Frankfurt, Germany last week.
Arguably the most well-known public company is First Myanmar Investment (FMI), which was listed through an initial public offering in 1991. Like most public companies, it runs an over-the-counter trading service at its office, charging a 1 percent broker fee.
“Buying and selling of shares is happening just about every day but the number of shares changing hands is small. Yesterday we brokered the sale of 102 shares. Our shareholders don’t like to sell large amounts because they have trust in the company,” said Daw Tin Ohnmar Min, manager of the company’s share department.
New shares are only issued to shareholders at the company’s annual general meeting, while existing shares sometimes become available through the company’s trading arm.
When FMI floated in 1991, one share cost K1000. More than 4900 shareholders collectively own more than seven million shares, which now trade at K1750. While in real terms this means they have declined in value, the attraction for most investors is the annual dividend, which last year was K125 a share.
“Shares trade at the market price, we don’t intervene,” she said. “We charge just 1pc [of the total transaction value] for the share transfer service … mostly prospective buyers have to wait some time to get shares.”
A small number of trades also take place at counters of other public companies. Daw Baby Sho, a spokesperson from the share department of First Private Bank, another pioneering public company, said sales were “regular”.
The company has sold almost 800,000 shares to about 5900 shareholders at a price of K10,000 each, with a dividend last year of 17pc.
“Only a small number of shareholders want to sell shares to get their money back. Our share price is now K15,000,” she said.
Forest Products Joint Venture Corporation (FPJVC), a 55-45 joint venture of the Myanmar Timber Enterprise and private investors, is one of two companies listed on MSEC. It has sold 45,000 shares to the public at K7500 each.
“We started selling shares in 1993 and stopped in 1996. Since then the share price has risen to K16,000,” said Daw Thidar, a spokesperson from FPJVC. “We give an annual dividend to shareholders in the range of 25 to 30pc. Presently we have no plan to issue more shares,” she added.
The securities market also includes treasury bonds, which have been sold by the Central Bank of Myanmar since 1993 and generate interest of about 12pc a year.
With cars steadily declining in value, gold considered risky and property increasingly unaffordable for middle-class investors, interest in alternative forms of investment is high, even if many are unaware of Myanmar’s security exchange and public companies.
“I didn’t even know there was a bourse operator in our country. What is it doing?” asked Ma War War Zin, a computer technician from Hlaing township, before adding: “If there’s a real securities market with reputable companies, I’d definitely be interested in buying shares. I want somewhere to invest my money for later in life.”
For budding investors like Ma War War Zin, however, the stock market is virtually closed. Investors in public companies rarely divest their assets, and most companies don’t offer new shares.
“We know very well about the public desire for shares,” said one person working in the tiny securities market. “Many people come and enquire about which companies they can buy shares in.”
As is the case at FMI, demand for shares in public companies usually outstrips those seeking to sell.
“There are so many people who want to buy shares in our company but they can’t get them at once. The prospective buyers have to wait in the secondary market. Our company still issues shares but the sales are directly managed by our chairman in order to avoid problems such as money laundering,” said Daw Baby Sho.
“I heard that there is a booking queue for 300 [FPJVC] shares to buy on MSEC. But no shares have become available recently,” said Daw Thidar.
However, small-scale investors expect more investment opportunities to appear in coming years, as several companies have flagged their intention to hold initial public offerings.
“I have heard Eleven Media Group will go public. When it does, I’ll definitely buy some shares if I can. I want to get some regular income for myself and I think it will also make a long-term investment for my grandchildren,” said retiree Daw Nyunt Nyunt, a former Ministry of Education employee.
Ma Nu Nu Yin from South Okkalapa township said she wanted to buy shares for her daughter. Seven years ago she bought K200,000 of shares in Myanmar Info-Tech and although she is yet to receive any dividends from the company, she is eager to get the chance to play the market again.
“I think most [middle-class] people like me want the opportunity to buy shares. The problem is that there are few reliable public companies to buy shares in so it makes more sense for me to send my extra money to the banks. It’s also easier to get it back whenever I want it,” she said.
Colonel (retired) Hla Moe is a shareholder of Myanmar Citizens Bank, which is listed on MSEC. While he is eager to put his savings into a long-term investment like shares, his previous experience has made him wary.
“Investing in solid companies is a long-term bet and not for those who want prompt profits. I think this is one reason why buying shares is not that attractive because for almost all public companies here share price increases and dividends have not kept up with inflation. This has weakened the demand for securities and therefore its development,” U Hla Moe said.
“But I still want to buy shares. I have some surplus money but am not in a position to start my own business so I want to invest for my children. I’ve heard Eleven Media Group will go public. I welcome it and will buy some shares when they do,” he added.
Despite the apparent demand, few companies have publicly committed to a public offering of shares.
Daw Lei Lei Oo, owner of Marlar Myaing, a trading company that specialises in agricultural chemicals and appliances, said she would wait and see how Myanmar’s economy developed before making a decision on going public.
“We don’t really have any plan to do it at the moment but I will consider it, depending on the business conditions,” Daw Lei Lei Oo said.
The exception is Eleven Media Group, whose chairman and chief executive officer Dr Than Htut Aung told guests at the company’s 11th anniversary celebration in early June he intended to go public within three or four years.
“I don’t think of [Eleven Media Group’s] success as because of me or my partners, but rather because of the people of Myanmar and our readers. Therefore the company should be owned by the public,” he said.
But the development of a securities market will take more than demand for shares and companies that are willing to list.
U Soe Thein, a retired deputy director general of the Ministry of Finance and a current executive director at MSEC, said better corporate governance and accountability would also be a key requirement.
“We still need to do much more to improve corporate governance and corporate culture. I want to see those companies that intend to go public start studying what it takes to become respected and successful public company,” he said. “If they don’t, there will be little benefit for both the company and its investors.”
MSEC aims to expand its exchange centre in 2015, when the ASEAN Free Trade Area (AFTA) comes into force. To withstand the regional competition that the AFTA treaty will unleash, local companies are expected to need to make significant investments, and raising capital through a public share offering is one possible avenue.
MSEC could also face competition from a South Korean bourse operator, which has reportedly made enquiries with the government about opening an exchange here. The company, Korea Exchange, is already involved in running the newly opened Laos Securities Exchange and a long-delayed stock market in Cambodia, which are both joint ventures with the respective governments. In January, news agency Reuters reported Korea Exchange representatives had held two meetings with the government about the project.
Well-known economist Dr Khin Maung Nyo said the government needed to lead the way in developing the securities market, and could draw on the expertise in the presidential advisory group for economic affairs.
“We still need to fix many things to meet the standards of what we could call a typical securities market but I think we can do that through trial and error. The securities market is not too fearsome to take that long time for preparation. If the government can work together with business organisations, such as the UMFCCI, to create a suitable business environment, the market should develop quickly.”