Scramble behind the scenes as Yangon Stock Exchange nears launch

Just a week before Myanmar’s first modern stock exchange is set to open on December 9, a much-delayed announcement on the names of securities companies has not yet been made, underwriters have not received licences and domestic IPOs seem a distant dream.

Ten companies have been offered conditional underwriting licences for the Yangon Stock Exchange, but several say they are not yet ready to operate.

According to sources within a number of the companies, those offered provisional licences include AYA Bank, CB Bank, Daiwa Securities, Asia World affiliate Global World Securities, Innwa Bank-linked Aung Myint Moe Min Insurance, Loi Hein Company, KBZ Bank, United Amara Bank and Young Investment Group.

U Maung Maung Thein, chair of the Myanmar Securities and Exchange Commission (MSEC), said he could not confirm these names, as a number of companies have not yet completed the formalities necessary for a final licence – such as registering a subsidiary with the Directorate of Investment and Company Administration and putting up K15 billion in initial capital. The announcement was originally planned for June.

At a meeting on November 30, he “urged the companies to pay their licencing fees by December in preparation for the launch date”, state media reported yesterday.

Sources working closely with the exchange say a December 9 opening is unlikely to be followed immediately by new listings, something U Maung Maung Thein has also hinted at.

Since the exchange “is already 67 years late, the timing is not important”, he told The Myanmar Times last month. “The only thing that matters is developing a strong exchange, beginning in early 2016.”

Director U Thet Tun Oo from the Myanmar Securities Exchange Centre said the first initial public offerings, or IPOs, will not be launched until the underwriters have been granted their licences, adding that this process has not yet started.

U Pe Myint, managing director of CB Bank, said his bank is still hiring staff for its new securities company, and needs to train them.

The bank will only pay the K15 billion deposit needed to obtain a final licence once it has registered a subsidiary with DICA, said U Pe Myint, adding, “I don’t think everything will be ready for December 9 We’re just opening an office at the moment.”

Some are more prepared, however. U Nyo Myint, senior managing director of KBZ Group, said the bank has arranged everything including hiring staff and opening a new office in downtown Yangon’s Strand Square.

KBZ has met the criteria to be awarded a full licence and is setting up a joint venture with Singapore’s Stirling Coleman Capital, which will be called KBZSC, he said.

“I think the stock market in Myanmar will be dynamic under a new government, with more foreign investments hopefully coming in.”

A spokesperson for Daiwa Securities Group told The Myanmar Times the Japanese firm is also well prepared. In addition to receiving a conditional underwriter licence, the group co-owns the exchange.

Responding to questions about a potential unfair advantage or conflict of interest due to its multiple roles, a Daiwa spokesperson said the Myanmar government seeks to establish a fair and transparent capital market.

“We have been continuing our preparation, to be ready to start providing our services as early as possible toward the opening of the stock exchange,” he said, adding that he hopes the other underwriters will be ready to start business as soon as possible.

The exchange is 49 percent owned by two Japanese companies – Japan Exchange Group, the operator of Tokyo Stock Exchange and Daiwa Securities Group, which signed an agreement with state-owned Myanma Economic Bank (MEB) on December 23 last year.

Due to its ownership, the exchange risks opening under US sanctions, as previously reported by The Myanmar Times.

While the Yangon Stock Exchange itself is not designated specifically by the US Treasury department’s Office of Foreign Assets Control (OFAC), US officials have said that under US law it would be automatically sanctioned, as it is 51 percent owned by MEB, a state entity under US sanctions.

Entities owned 50pc or more by one or more blocked persons on the US Specially Designated National (SDN) List are subject to US sanctions, said a US embassy spokesperson. “The 50pc rule applies regardless of whether OFAC has listed such entities.”

U Maung Maung Thein told state media yesterday that around five companies would be ready to list when the exchange opens.

No names have yet been announced publically, though the MSEC chair told Eleven Myanmar that First Myanmar Investment, Myanmar Citizens Bank and Myanmar Thilawa SEZ Holdings would attempt an initial public offering.

Other companies to publicly state their intention to list include Asia Green Development Bank and Myanmar Agri-Business Public Company (MAPCO).

Listing criteria for companies were published on August 23. Firms must meet these standards to attempt an IPO.

Rules state that companies must have at least two years of profit as prepared under Myanmar Financial Reporting Standards and must be tax compliant.

They must also have at least K500 million in paid-up capital and must list with at least 100 shareholders, among other requirements.

Source: Myanmar Times

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