Looking at the future of Yangon Stock Exchange

  • By Myint Maung Soe

A discussion was held at Yangon Stock Exchange (YSX) during the last week of October on the present and future of YSE. Daiwa Research Company’s Chief Consultant and Managing Director Mr Ryota Sugishita and YSX Senior Executive Manager U Thet Tun Oo participated in the discussion.
To establish a financial market like other Asian countries the government founded YSX on March 2016. But progress less than expected. In the earlier part of its existence the YSX index was between 1300 and 1400 but it gradually declined. The lowest point was in April when it dipped to 366. Although it had climbed back from the trough, it is yet to reach the desired level.

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On this, Mr Ryota Sugishita said, “Stock markets are always dipping and rising. Normally it’ll rise after falling.”
At the moment YSX officials were preparing to create a good prospect for it. It would be interesting to see how this will make its index rise.
The preparation was to open up the stock exchange market to foreign investment. At the moment, participation of foreigners in YSX was not permitted. Even the planned market opening wouldn’t be a total opening up of the YSX to foreign investors and investment as there still will be some limitations.
In the first stage, foreigners residing in Myanmar would be allowed to invest in YSX. There were instances of stock exchange index rising when foreign investments were allowed. South East Asian country Viet Nam establishes Ho Chi Minh Stock Exchange in year 2000. When it was established, only 20 per cent of foreign investment was permitted.
In 2003, it was increased from 20 to 30 per cent. By 2005, it was further increased to 49 per cent. As foreign investment and participation was increased, stock exchange index also increases gradually.
It was the same in other ASEAN countries like Thailand and Indonesia. In the earlier part, foreign investment and participation was restricted. Stock Exchange of Thailand was established in 1975 and foreign investment or participation in it was allowed only in 1991 and even then, only 8 per cent was allowed. Jakarta Exchange increases foreign investment to 40 per cent in 2002. Stock exchange index increases whenever foreign investment was permitted.
“Participation or permitting foreign investment in a stock exchange does not necessarily mean the stock exchange index will rise automatically. This depends on the country’s economic situation, supply and demand. But foreign investment participation was always one of the reasons toward the development of a stock exchange” said Mr Ryota Sugishita.
Many factors were considered toward permitting foreign investment in order to strengthen the stock exchange market in Myanmar.
On this YSX Senior Executive Manager U Thet Tun Oo said, “According to Myanmar Company Law enacted in 2017, foreigner participation was permitted up to 95 per cent. YSX also issued a notification about foreigner participation in YSX on 12 July 2019.
But this was not complete as more notifications need to be issued about it.”
Almost all stock exchanges in Southeast Asia countries had already permitted foreign investment. Some had permitted hundred per cent full participations while some had permitted up to a certain percentages only.
Whether it was full or partial participation, foreign participation will drive up both the supply and demand. Its time local businesses foresee the opportunities rising from YSX and grasping it fully.

(Translated by Handytips)

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