U Yin Zaw Myo, Managing Director, Yangon Stock Exchange (YSX): Interview

Interview: U Yin Zaw Myo

How far has the YSX progressed, and what milestones do you want to reach in the medium term?

U YIN ZAW MYO: Within the first eight months of YSX starting stock trading, three companies were listed on the exchange, and we hope to add more during the 2016 fiscal year. To date, we have a total trading volume of over 1.5m shares in the market, worth around MMK59bn ($53.1m) overall. This is a significant amount for a market this small, especially when compared to the Lao Securities Exchange, which started in 2011, and the Cambodia Securities Exchange, which began operations in 2012. We believe there are many potential firms preparing to list on the YSX, receiving sophisticated advice from domestic and foreign advisors, and we hope there will be dozens more by the end of the 2017 financial year.

The YSX is now taking its very first steps. We have a lot to do to develop the market in terms of hard and soft infrastructure. The milestones that we wish to achieve in the medium term include raising the number of listed companies, increasing the size and diversity of the investors, and setting up clear market regulations and procedures together with regulatory bodies. We prefer to maintain a certain level of liquidity for our investors and ensure that the procedure for raising capital for listed companies is transparent and has a good disclosure scheme.

What steps need to be taken to encourage institutional investors to participate on the exchange?

YIN ZAW MYO: We recognise that the role of institutional investors in the YSX is very important to develop and stabilise the market. On the demand side, Myanmar doesn’t have a sufficient number of institutional investors due to lack of capital and to regulations restricting investments made on their behalf. We do not have a private pension fund or central provident fund for people working in the private sector. Even though Myanmar has 12 private insurance companies and 23 private banks at present, their cash reserves and premium incomes are only allowed to be invested in government bonds and deposited in savings accounts held by banks. The government should encourage more institutional investors and gradually liberalise state and private financial institutions to invest in capital markets for the long term.

On the supply side, the capacity and liquidity of the capital markets are essential to encourage institutional investors to invest long-term. We should continue to increase the number of listed companies and investors joining this market. However, a small number of stocks is not enough to diversify investors’ portfolio risk. The insurance sector and banks could be valuable corporate investors when the YSX has enough listed stocks to diversify the risk. So the next step for the YSX is to attract as many listed companies as possible. There are, aside from institutional investors in the traditional context, certain religious trust funds, social welfare funds, social foundations and welfare organisations, and this is unique to Myanmar. If there is a sufficient number of stocks and bonds traded in the capital markets, they might be interested in investing in such assets to utilise their reserve funds in an environment of relatively high inflation rates.

Considering the strict listing requirements of the YSX, how prepared are companies in terms of proper corporate governance (CG)?

YIN ZAW MYO: CG is very important, not only for YSX-listed companies but for all companies. Without sound CG guidelines, firms cannot build trust in their investors. Companies should recognise not only the definitions of CG but also the essential meaning of it. According to the YSX’s Securities Listing Business Regulations, all candidate companies for listing must submit concrete CG procedures to the YSX, whose listing department examines whether the firm can conduct their business in line with those guidelines.