Stock exchange rules needed to meet 2015 target

Stock exchange rules needed to meet 2015 target

By Zaw Htike   |   Monday, 02 June 2014

Rules governing the planned Yangon Stock Exchange have been submitted to the Attorney General, as insiders push for their adoption to meet an October 2015 launch target.

Myanmar has long had an over-the-counter exchange in the Myanmar Economic Bank building on Sule Pagoda Road with two listed companies, but trading rarely occurs and the exchange is not modernised.

The rules submitted to the Attorney General will establish a Securities and Exchange Commission (SEC), which will be responsible for licensing brokers, dealers, underwriters and the Yangon exchange itself, said Myanmar Securities Exchange Centre (MSEC) managing director Inami Shigeto.

The rules are just one set of regulations that will be required to launch a modern exchange, following the passage of the Securities Law in 2013.

"At the moment we have a law but no authority to govern," said Mr Inami.

While current facilities at MSEC can provide for small-sized transactions and hand delivery of shares, there is much do if a modern paperless exchange is the goal, he said, adding he was not sure if it could be in time for the October 2015 target set by the government.

A securities and exchange law for an eventual modern exchange was first drafted in 1995, and approved by the Attorney General's office in 1997. However, the Asian financial crisis the same year derailed the plans and the project was suspended until recently, he said.

The current Myanmar Securities Exchange Centre lists only two public companies, Forest Products Joint Venture Company (FPJVC) and Myanmar Citizens Bank, both of which are part government-owned.

Trading is a relatively rare occurence as FPJVC consistently pays high dividends of 30 percent, meaning few are interested in selling shares, while shareholders of Myanmar Citizens Bank are also reluctant to sell, according to MSEC executive director Daw Tin May Oo.

"There are no sellers and many buyer, so trading happens once or twice a year," she said.

Myanmar has over 100 public companies, in which shares can be bought and sold by Myanmar citizens over-the-counter, often at the company's headquarters itself. Not all public firms maintain an active share market, though. Mr Inami said that while the Directorate of Investment and Company Administration (DICA) currently has oversight, the SEC could play a part in governing public companies – after the latest round of rules are passed.

Several public companies are known to be interested in listing on the eventual modern exchange.

"AGD Bank and Myanmar Agribusiness Public Company (MAPCO) could be good candidates for the Yangon Stock Exchange, but we cannot commit to anything for sure at the time as the criteria for listing has not yet come out," he said.

While many Myanmar firms may be interested in the access to capital the exchange will bring, Mr Inami said the process of listing will force companies to disclose their true financial statements. This may cause problems with firms who have not paid requisite taxes as their books will be open to scrutiny.

Independent economist U Hla Haung said that many companies keep four or five different sets of financial records to avoid taxation, and the trend has continued even though some firms have transitioned to public companies.

He added that common practice among current public companies is to fix the price of their shares, with shareholders receiving value through dividends.

"These kind of things should be administered by the authorities properly," he said. "With this trend I don't know how the coming stock market will be successful, though it is a must for developing the country's economy."

Deputy finance minister U Maung Maung Thein said he was concerned about public companies selling shares without any proper disclosure, urging firms to eventually list, at a May 24 signing ceremony for MAPCO to prepare for the eventual stock market.

It will not be easy to get everything ready to list on the exchange, said U Ye Min Aung, MAPCO managing director.

"We began preparing last year to list. We want MAPCO to emerge as a big and strong public company on the international marketplace," he said.

"There are many challenges ahead. We are trying to build our corporate governance, finances and management regulations to be in line with the international standard," he said.

Myanmar is the last member of ASEAN without an exchange. While many of the region's exchanges have been successful, others have launched with little activity. Cambodia officially opened the doors on its exchange in 2011, though it took a year before the first company listed.

The Myanmar government has been keen to make sure the Yangon Stock Exchange is a success, according to Mr Inami, adding MSEC had been requested to make sure at least five companies are ready for the launch – one more that initially joined the Ho Chi Minh Stock Exchange in Vietnam when it launched in 2000.

Source: http://www.news.myanmaronlinecentre.com/2014/06/03/stock-exchange-rules-needed-to-meet-2015-target/