Thursday, May 31, 2012

Japan to develop Burmese stock exchange by 2015

Thursday, 31 May 2012 12:43 Mizzima News
An agreement on technical aid has been signed between the Central Bank of Myanmar and the Daiwa Research Institute and Tokyo Stock Exchange of Japan, the New Light of Myanmar said on Thursday.

Burma’s opposition leader Aung San Suu Kyi and Finance and Revenue Minister Hla Tun at a financial workshop in Rangoon in November 2011. Photo: Mizzima

Minister of Finance and Revenue Hla Tun, who is also chairman of the Capital Market Development Committee, said Burma would establish a stock exchange by 2015 under a blue print set out by the committee.

To provide for listed companies on the stock exchange, Burma has allowed the set-up of public companies in a bid to develop the market economy. The Directorate of Investment and Companies will encourage the public to invest their savings and capitals in appropriate business sectors.

According to the directorate, the seed capital for public companies is set to be at least 500 million kyat (about US$ 625,000).

Entities seeking to become public companies must have at least seven initial holders, sell unlimited shares to the public, be an economically sustainable business and employ skilled labor.

Many Japanese and foreign investors believe that the envisaged stock market will open up numerous business opportunities in the future, although many obstacles remain.

Experts have pointed out that after five decades of isolation from the global community, the move to an up-to-date economy will be fraught with problems. The IMF is currently working with the government in an effort to bring its financial system up to basic international standards.

The plan to set up a stock market by 2015 comes at the same year as the Association of Southeast Asian Nations plans to integrate the region’s economies to create the Asean Economic Community, in which trade barriers will be dropped.

Meanwhile, the Tokyo bourse is expecting future benefits by helping Burma to open its stock exchange, the Japan Times said in early May.

“We hope our support will lead to more active trade on our exchange,” spokesman Naoya Takahashi was quoted as saying. For example, he said the TSE hopes to build a broader tie-up with Burma’s stock exchange by listing financial products on each other's markets or exchanging stock price information.

“For TSE, it is a long-term story, rather than a short-term business chance,” Takahashi told the newspaper.

Daiwa will be in charge of helping the country nurture a capital market through various measures, including the training of the stock exchange's workforce and giving advice to set up the IT systems necessary in the securities business, the article said. TSE will also help establish rules and standards to operate a stock exchange.

Daiwa said the company's approach to the country dates back to the early 1990s, which led to Daiwa's official contract with the country to help set up the Myanmar Securities Exchange Center Co., an over-the-counter stock market, in 1996.

Daiwa said it would use its experiences at the MSEC to create the new stock exchange. Currently, at the MSEC only the shares of two companies – Forest Products Joint Venture Co. and Myanmar Citizens Bank – are traded.

Renowned U.S. investor Jim Rogers told Forbes in a 2011 interview that if Burma opens a stock exchange, he would buy shares there “in a minute.”

But the fledgling democracy faces many serious hurdles in the short term, including the lack of an overall modern financial system and crucial Internet technology for transactions, money transfers and settlements.

Currently, only cash and checks are available for settlements at the MSEC, the tiny over-the-counter market. ATMs have only just been introduced at the country's banks, and credit cards can barely be used in Rangoon or the capital of Naypyitaw.

In total, there are about 50,000 firms in Burma, and nearly 80 per cent of them are small businesses.

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