All Quiet on Myanmar Exchange

More happening outside than within: Myanmar's sole stock exchange, in the city of Yangon. Source: Getty Images

The old colonial buildings in downtown Yangon survived British rule, the Japanese occupation and decades of military dictatorship in Myanmar, once known as Burma. The country looks destined to withstand modern finance as well. Weekdays at 9.30 am, within a venerable pile in the old commercial quarter, the security guard creaks opens the steel door to the trading room of the Yangon Stock Exchange, turns on the lights and organizes stacks of newspapers from the previous week. But the floor remains empty, and stock prices – all four of them – are unchanged on the ticker.

Change, of many kinds, is coming late to Myanmar, which is hardly surprising; until recently, the former dictatorship was virtually cut off from the world. True, the economy is expanding rapidly. The World Bank expects Myanmar’s economy to grow an average 7 percent per year until the end of this decade, similar to other “Asian Tigers” like China and India. But only a fraction of the population has a bank account, and even fewer have experience investing in the country’s sole stock market, which has hardly budged since its debut in early 2016.

A German financial manager wants to change that. Rudolph Rolles – known locally as Rudi – is the managing director of KBZSC, Myanmar’s largest securities trading firm. The moniker suits the relaxed Mr. Rolles, a 60-year-old from the German state of Saarland, and is well-suited to the informal style of Yangon’s financial circles. Recruited two years ago to develop Myanmar’s securities market, he’s finding the going tough.

“Almost no one here has a good understanding of what a stock exchange is, how it works and what advantages it offers.”

Rudolph Rolles, managing director of KBZSC, Myanmar's largest securities firm

“There is no shareholder culture in this country,” Mr. Rolles said. “Almost no one here has a good understanding of what a stock exchange is, how it works and what advantages it offers.” He noted the financial world has been viewed with great skepticism since 2003, when a banking crisis caused severe economic disruption in Myanmar.

Mr. Rolles’ company has promoted an explanatory video about the stock market on Facebook, and is developing a smartphone app for stock trading, to make the market more accessible to individuals. The firm was the first financial service provider in Myanmar to prepare analyst reports on publicly-traded companies. It has also tried to educate potential investors about the capital market by organizing road shows outside the capital city Yangon. “I wanted to be part of the history that is being made here,” Mr. Rolles said. Curiously, none of his employees at KBZSC had ever worked as stock brokers or investment bankers. “This sort of thing simply didn’t exist here,” he said.

The operators of the Yangon Stock Exchange seek to portray the stock exchange, which is open to the public, as a place of economic advancement. The word “success” is engraved into a golden bell hanging next to the price quotation board. A magazine with a list of the richest Asians is on display next to the entrance. A poster lists inspiring Warren Buffett quotes. There are also books with titles like “Market Wizards” and “How to make money in stocks – a recipe for success in good and bad times.”

Still, the booming mood in the economy is hardly palpable at the stock exchange. Su Myat Sandi, a customer adviser at CB Securities, runs a small stand in the trading room to recruit stockholders. Most of the time, however, she waits in vain. “Usually only one or two people come in every day to open an account,” she said. “And sometimes nothing happens at all.”

Inside The Yangon Stock Exchange, The World’s Tiniest Bourse Hungry For Forbidden Foreigners
Inside the quiet Yangon exchange, a choice of four company stocks. Source: Getty Images

Early on, those who ventured into Yangon Stock Exchange learned that trading comes with risks. During the first day of trading on March 25, 2016, stock in conglomerate FMI closed at 31,000 kyat, or about €20. Since then, the stock has lost more than half of its value. FMI was the first company to float in Yangon, and only three other companies have been listed since – and all of their stocks have fallen sharply.

Mr. Rolles blames those price drops on Yangon’s real-estate bubble, which has upset several large companies. “In this environment, hardly anyone dares to pursue an IPO,” he said. As long as the market remains tiny, it’s difficult to lure more investors.

Eventually, the stock exchange may open up to foreign investors, a move that could jump-start trading (currently, only Myanmar citizens are allowed to buy stock in Yangon) but the government keeps postponing the date. Frustrated locals note that official schedules are rarely stuck to in Myanmar.

One thing that’s on time is the end of trading. The stock exchange closes at 1 p.m. with a tape-recorded gong – after three-and-a-half hours of virtually non-existent activity. The balance on the display board is sobering: The day’s turnover amounts to 60 million kyat, or about €40,000. As she packs up her things, Su Myat Sandi is optimistic: “Maybe it’ll be busier tomorrow.”

Based in Bangkok, Mathias Peer covers Southeast Asia’s economies for Handelsblatt. To contact the author: peer@wpbangkok.com

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