Looking back, it’s been 2 years since we spoke about Myanmar last. We thought it may be an opportune time to provide an update on the happenings on the country, and what it means for you, as an investor.
Myanmar has been experiencing rapid growth, with 7.5% growth in FY2013 and a forecast for 7.8% in FY2014. Ever since sanctions were lifted on the country, it has found itself in the midst of an economic boom. The currency (Myanmar Kyat – MKK) has appreciated significantly since falling to a low of 1,350 per USD to under 1,000. Myanmar received under $2bn in FDI in 2013, but is expected to exceed $100bn in FDY by 2030, according to McKinsey.
Myanmar has had various iterations of stock markets in its history, starting with first, the Rangoon Stock Exchange which operated in the 1930s. The current markets is an OTC-only market that has two companies with tradable shares. The Myanmar Securities Exchange Centre (MSEC) began operations in 1996 and never managed to gain traction. Here, is a reasonably good summary from the website of the Central Bank of Myanmar about MSEC.
Yangon Exchange is planning to launch in October 2015. This exchange will be a typical public equities exchange, and has already engendered considerable interest. The Tokyo Stock Exchange (TSE) and Daiwa Group are responsible with the creation of the exchange, and of implementing internationally recognized best-practice for the exchange. It will take many years for the exchange to establish itself and for Myanmar’s corporate culture to evolve and conform to international standards. That being said, it will also be a great opportunity to invest in a country with immense potential and a population over 60mm (the 24th most populous country in the world).
Given no opportunities to invest in securities until the tail-end of 2015, now is a great time to become familiar with Myanmar and its potential.
To gain a sense of the scale of change underway in Myanmar, check out this regular feature which discusses the major events relating to Myanmar over the past week. In the same theme, foreign banks are soon to receive licenses to operate in Myanmar. Traffic in the once sleepy Yangon has created significant issues as the infrastructure struggles to keep up. All of this however, is a good sign and a positive indicator for future investment potential.
Our thesis on Myanmar is quite simple and is outlined below:
- Myanmar has 61mm people and a GDP per capita of only about $1,000 (it should be recognized that many would suggest that the grey and black market are a huge component of the actual economy. As such, the actual GDP for Myanmar may be as high as 2,000. Still a far cry from its neighbours China and Thailand.
- Myanmar has a literacy rate of 92% and a reasonably good post-secondary education system
- Myanmar is a mining rich country and many of these resources are yet to be discovered. Modern exploration techniques for minerals have largely been absent from Myanmar. When these are utilized it is likely to result in a significant upward revision to proven reserves for virtually every mineral
- The country’s relationship with its neighbours, in particular to China should result in significant growth opportunities over the next few years. Myanmar generated 70% of its electricity from hydroelectricity and has the potential to generate much more. In the meantime though, Laos may be a useful source of electricity for the country. Solving the electricity issue would provide a significant boost to growth in the country.
Burma / Myanmar
While Burma currently has the Myanmar Securities Exchange Centre (MSEC), an exchange founded back in 1996, it had little IPO activity after it’s opening and is effectively dead. Fortunately, the government has enlisted Daiwa Securities Group and the Tokyo Stock Exchange to help them start a new exchange: the Yangon Stock Exchange (YSE). From the latest reports, it is currently slated to open in October 2015 with six companies interested in listing.
List of Countries Without Stock Exchange
Of the roughly 200 nations (both official and partially recognized) in the world, 40 of these countries have no stock exchanges. As frontier market investors with a focus on public equities, keeping an eye out on which countries are about to launch new stock exchanges is important as they usually represent promising investment opportunities. This is because stock exchanges require a great deal of capital, expertise, controls, and economic growth in order to survive, and a stock market launch is a promising sign that early economic challenges have been overcome. We could not find a definitive list of countries with no stock exchanges online, so we have compiled our own.
Here is a list of countries without stock exchanges (population over 1 million):
| Country Name | Region | GDP/Capita | Population |
| Angola | Sub-Saharan Africa | $ 6,247 | 19,183,590 |
| Burma | Asia-Pacific | $ 1,740 | 60,380,000 |
| Cuba | Caribbean | $ 9,900 | 11,167,325 |
| Democratic Republic of Congo | Sub-Saharan Africa | $ 1,287 | 69,360,000 |
| Eritrea | Sub-Saharan Africa | $ 707 | 6,536,000 |
| Ethiopia | Sub-Saharan Africa | $ 1,366 | 87,952,991 |
| Gambia | Sub-Saharan Africa | $ 1,962 | 1,882,450 |
| Guinea | Sub-Saharan Africa | $ 1,125 | 10,628,972 |
| Kosovo | South Europe | $ 7,766 | 1,815,606 |
| Lesotho | Sub-Saharan Africa | $ 2,255 | 2,098,000 |
| Liberia | Sub-Saharan Africa | $ 703 | 4,397,000 |
| Madagascar | Sub-Saharan Africa | $ 970 | 21,263,403 |
| Mauritania | Sub-Saharan Africa | $ 2,218 | 3,461,041 |
| North Korea | Asia-Pacific | $ 1,800 | 25,027,000 |
| Somalia | Sub-Saharan Africa | $ 600 | 10,806,000 |
| South Sudan | Sub-Saharan Africa | $ 1,350 | 11,739,000 |
| Tajikistan | Central Asia | $ 2,354 | 8,160,000 |
| Timor-Leste | Asia-Pacific | $ 2,242 | 1,212,107 |
| Turkmenistan | Central Asia | $ 9,510 | 5,307,000 |
| Yemen | Middle East / North Africa | $ 2,316 | 25,235,000 |
GDP per capita is on a PPP basis and is as of 2013 from the IMF.
There are also 20 countries with a population under 1 million that do not have stock exchanges: Andorra, Belize, Brunei, Comoros, Djibouti, Kiribati, Macau, Marshall Islands, Micronesia, Monaco, Nauru, Palau, Samoa, San Marino, Sao Tome and Principe, Solomon Islands, Tonga, Tuvalu, Vanuatu, and Vatican City.
Weekend Reading: Myanmar Edition
Since the National League for Democracy (NLD)’s election victory early this month, the optimism for Myanmar’s future has become palpable. Prospects of political reform leading to economic prosperity have resulted in GDP growth forecasts increasing from 5.5% in 2011 to over 6% by 2013 according to the Asian Development Bank. With its oft-mentioned proximity to Asia’s economic engines in China and India, and with David Cameron himself calling for removing EU sanctions, the country seems poised to finally break out and catch up to the rest of the region.
Here are select articles from the past week covering developments in Myanmar:
- The biggest emerging market story since China in 2001 (MoneyWeek)
- Revamped Myanmar securities exchange set to launch in 2015 (Reuters)
- Myanmar has much to offer but a long way to go (beyondbrics)
- After Decades of Limits, Myanmar Offers Riches (NY Times)
- ADB says Myanmar economy set to boom (Bloomberg)
- Myanmar’s Isolation Gives Way to a Flood of Visitors (NPR)
- An image makeover for Myanmar Inc (Reuters)
- Sanctions Against Myanmar: Happy ending in sight (Banyan)
Ref:http://www.investmentfrontier.com/2014/04/14/heres-learn-myanmar-2015/
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