Foreign investors were allowed into Myanmar’s fledgling stock market on Monday, stoking hopes that the infusion of international funds will breathe new life into the country’s economy.
“Myanmar’s economic reforms have taken longer than imagined, but they’re definitely advancing,” said Hideki Matsushita, a Japanese national who heads a local investment company. Matsushita has applied to open a local brokerage account, required for noncitizens if they want to invest.
The Southeast Asian country with a population of about 55 million boasts a solid economic growth rate in the 6-7% range. The market opening “will be the spark for Myanmar to gain notice from international investors,” Matsushita said.
Following the acceptance of foreign investment in the retail and wholesale sectors in May 2018 and the issuance of licenses to foreign insurance companies in November 2019, the government, led by State Counselor Aung San Suu Kyi, aims to attract foreign capital and accelerate modernization of Myanmar’s economy.
An inflow of international investment funds would also likely boost corporate transparency in Myanmar. “[Attracting foreign investors is] good for disclosure and good for bringing capital into Myanmar,” Vicky Bowman, director of the Myanmar Centre for Responsible Business, told the Nikkei Asian Review. “Foreign money is looking for a well-run, transparent company.”
The new rules permit foreign residents and nonresidents alike to open an account at domestic brokerages. Through these channels, participants can engage in online investing.
Before opening a brokerage account, prospective investors must open an account at a bank specializing in holding investment funds. Face-to-face identity verification means investors must visit Myanmar for at least a few days.
Just five companies are listed on the Yangon Stock Exchange, with only three open to international investors. Among the three, First Private Bank sells shares only to foreign financial institutions with prior approval.
The other two are open to retail investors, but one of them, First Myanmar Investment, carries a foreign investment cap of 2%. The other, special-economic zone operator Myanmar Thilawa SEZ Holdings, has a 5% limit. This means that shares available for purchase by foreign retail investors total around $9 million between the two.
TMH Telecom is awaiting approval from authorities to sell shares to foreigners, while Myanmar Citizens Bank has no plans to allow foreign ownership.
The Myanmar Stock Price Index closed down 2.2% on Monday to finish at 456.34. The index has wallowed at roughly half its 2016 peak, signaling the need for further regulatory easing to invigorate the sleepy market.
A sixth company, logistics provider Ever Flow River Group, was slated to have its initial public offering on Friday, but the debut was postponed to May due to the novel coronavirus outbreak.
The new investment opportunities, however, intrigue at least some early movers.
“Fifty to sixty people have shown interest in opening brokerage accounts, especially among Japanese expatriates,” said Takashi Yamaguchi, managing director at Myanmar Securities Exchange Centre, one of six local brokerages jointly owned by Japan’s Daiwa Securities Group and a local bank.
Myanmar’s financial markets had been hamstrung by the military government that ruled until 2011, with strict controls maintained on the entry of foreign capital. Such restrictions eased in 2018 as new legislation recognized an entity as a domestic company as long as foreign ownership does not exceed 35%.
The Yangon Stock Exchange was founded in December 2015 and opened in March 2016. Japan’s Daiwa Institute of Research and Japan Exchange Group, the operator of the Tokyo Stock Exchange, are investors in the YSX.
Additional reporting by Nikkei staff writers Kyohei Suga and Taizo Wada in Tokyo.
This article was first published on Nikkei Asian Review.