November 29, 2020

Yangon Stock Exchange, Like ‘Trading In Wonderland’

This year the Yangon Stock Exchange (YSX) opened to foreign traders. Be warned. “The YSX is a bit like ‘Alice trading in Wonderland’” whispers an anonymous source.

Since opening in 2016 there’s been a 50% drop in market capitalization, volatile dividend’s and a very slow trading platform.

For Vijay Dhayal, Investment Advisor the YSX is a potential gold mine, offering unimaginable growth as companies tap into Myanmar’s vast natural resources and growth.

To date that hasn’t been realized.

“We haven’t seen a capital return overall. If you look at FMI, the company listed in 2016 for 20,000 per share, today it’s trading at 10,000,” said Dhayal. “So, no, you can’t say that MYANMIX (YSX) has performed”.

In March 2020 the government looked to foreign investment as a way of catapulting the flow of money into the exchange.

“The aim was to increase liquidity to enable business to fund expansion,” said Julia Charlton, Lawyer, Charltons Myanmar.

Julia Charlton

Any developing nation, such as Myanmar, needs huge injections of capital to fund infrastructure and development. In exchange investors expect high returns and some guarantees of stability.

Today there are six listed companies with a combined share value, market capitalization, of around 649,310,000,000 MMK ($507,111,110 USD).

That’s tiny even compared to the relatively new Ho Chi Minh (HSX) exchange, which opened in 2008.

The HSX has a current market capitalization of over $135 billion USD.

There are questions raised as to why the MYANMIX hasn’t flourished, disregarding the political risks and Covid-19.

For Charlton, change is needed to create a vibrant trading market. A trading platform filled with a broad cross-section of higher risk, growth and mature companies.

What’s needed to achieve this is government support which, to date, has been described as ‘Lukewarm’.

“What would make this a vibrant exchange is if the Government committed State-owned highly, valuable companies to list”, said Charlton.

“Secondly, many companies still fail to meet the listing criteria. Regulations could be loosened to enable growth companies to raise public funds”.

Historically the YSX hasn’t established investor confidence. But wait! Have you heard about dividend stability? Hold onto your hats!

FMI in 2016 declared a 13.5 % dividend and 10% plus bonus shares in 2017. In 2019, the dividend was zero.

“Historical dividends range between 10% to 20% but the following year nothing. And yes, we know the market gets jittery when this happens. But we are working on it,” Sayar U Thet Executive Senior Manager, YSX.

As a keen investment advisor Dhayal never looks backwards, “The YSX isn’t a day trader’s playground. As investors we play the long game. There’s no doubt that in next ten years this market will be buoyant.”

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