Retail interest in Myanmar robust, but foreign investment is lacking

“Yoma Strategic offers a pure play on Myanmar, and is well positioned to capture growth opportunities in the country,” wrote RHB analyst Vijay Natarajan in his report.

While prospects could be “clouded” because of Rakhine, Mr Natarajan believes Myanmar holds long-term growth potential and views “the stock as the best proxy for investors to get exposure to Myanmar.”

With GDP growth projected to hit 6.8pc in 2018-19 and rise further to 7pc in the next fiscal year, according to the World Bank’s latest estimates, Myanmar remains one of the most promising emerging economies in Asia and retail investors have been keen for a slice of the pie.

Yet, Myanmar’s economy also remains one of the most difficult to access, with few avenues available for retail investors to tap. “Many Maybank clients have been asking about opportunities to invest in Myanmar. But other than Yoma Strategic, there are hardly any other options for retail investors to enter the country,” said Chua Hak Bin, senior economist at Maybank Kim Eng Research.

Mr Chua added that there is still a lack of statistics and data available on Myanmar compared to other countries, which has made it hard to generate reports that will help his clients make investment decisions.

Consequently, many have been channeling funds into Vietnam instead. “Vietnam has opened up its economy, signed on to the Trans-Pacific Partnership [of 11] and attracted a flood of foreign direct investments,” Mr Chua said.

Vietnam is also experiencing a tourism boom, led by tourists from China, as well as a remittance boom, as overseas Vietnamese re-invest their earnings, including into the property market. This has driven the current account and balance of payments into a surplus, even though imports have been on the rise.

Notably, Vietnam’s push to equitise its State-owned enterprises has also helped to boost interest and liquidity in the country’s stock market. “Vietnam has been the rockstar in ASEAN. There are lessons for Myanmar from Vietnam’s experience,” Mr Chua said.

‘Many Maybank clients have been asking about opportunities to invest in Myanmar. But other than Yoma Strategic, there are hardly any other options for retail investors to enter the country.’ Chua Hak Bin, Maybank Kim Eng Research

Companies Law

While efforts to reform the economy have been slower than expected to materialise, Myanmar, for its part, has taken credible measures to liberalise its market with the enactment of several new laws, including the Myanmar Companies Law, which was signed last December.

Among the most anticipated regulations is one that will allow foreigners to own stakes of up to 35pc in local companies, including the five listed on the Yangon Stock Exchange.

“The purpose of this regulation is to allow foreigners to own shares in local firms and for local companies to benefit from access to foreign capital,” said U Aung Naing Oo, director general of the Directorate of Investment and Company Administration (DICA), during the Myanmar’s Business Leaders Summit in Yangon last week.

At the summit, U Aung Naing Oo reaffirmed that the process of enforcing the Company Law “is going well. The key aim is to make it easier for foreign investors to invest in Myanmar. As promised, we will be able to fully enforce the law by August 1,” he said.

In fact, the YSX has seen a spike in interest from local companies to list on the exchange since the Companies Law was approved. Within a year, investors should be able to trade shares of three more firms – engineering company Great Hor Kham, Myanmar Agro Exchange Public Limitedand logistics player Ever Flow River  -on the exchange.

Still, some say it could take a while yet before the equity market opens up to retail investors. Pedro Jose Bernando, a partner at law firm Kelvin Chia, warns that while the Company Registration Office has already circulated draft rules on the Companies Law, it appears“they are more concerned now with the implementation of the e-registration system, and not so much with how the substance of the law, including the 35pc threshold will be implemented,” he told The Myanmar Times.

He added that the 35pc rule will like be rolled out incrementally, to privately-owned Myanmar companies first, before being extended to public-listed companies, if at all.

Stocks to watch

In the meantime, investors still keen on placing their bet on Myanmar still have a few other stock options to consider. Singapore-listed Memories Group, the vehicle which holds Yoma Strategic and Yangon-listed First Myanmar Investments’ tourism businesses, is one.

The company, which came to market in January, operates Balloons over Bagan and the Hpa-an Lodge and Pun Hlaing Lodge businesses. In March, it also bought a luxury yacht business in Mergui.

London-listed Myanmar Strategic Holdings (MSH) is another option. Just last week, the company took up a $150,000 minority stake in Myanmar-based digital consulting firm, nexlabs. This came a month after MSH and Auston Institute of Management announced a joint venture to set up and operate a private school in Yangon. It is also invested in the Ostello Bello hostel chain in Bagan, Mandalay and Inle Lake.

Then, there is London-listed Myanmar Investment International, an investment holding company with stakes across the financial services, telecommunications, healthcare and tourism sectors.

Investors can also consider a handful of other companies which operate businesses in Myanmar, including Thai national oil and gas company PTT Exploration and Production Public Company Limited (PTTEP) as well as Thai Beverage, which is listed in Singapore.

Last year, Thai Bev bought a 50pc stake in Myanmar Distillery Co, which makes Grand Royal whisky. In 2013, it acquired Singapore’s beverage maker Fraser & Neave (F&N), which this year received Myanmar Investment Commission approval to manufacture and distribute beer in the country, three years after it sold its 55pcstake in Myanmar Brewery to Japan’s Kirin Holdings for $560 million.

In the meantime, Yoma Strategic is already upping its game. Last week, the company announced a joint venture with Pernod Ricard, which makes Chivas and Ballentine’s, to produce and distribute whisky in Myanmar.