Myanmar firms look to raise funds on Singapore exchange
At Yangon International Airport, large blue-and-white signs in the arrival and departure halls promote Singapore’s stock exchange as the go-to destination for Myanmar businesses seeking capital.
The advertisements underscore Singapore’s nascent role as a magnet for Myanmar companies eager to grow as their country emerges from decades of isolation but frustrated by its crippled banking system and barely existing financial markets.
Lawyers and financial advisers who work closely with Myanmar firms say about six to 10 companies are considering a listing in Singapore over the next couple of years.
“Many Myanmar business owners admire the reputation of Singapore Inc and look forward to raising their own prestige with a Singapore listing,” said Chia Kim Huat, head of corporate and capital markets at Singapore law firm Rajah & Tann.
But hurdles to successful offerings are high.
Singapore’s bourse says while it has seen interest from Myanmar companies, they will have to meet its corporate governance standards. For many businesses, that’s still quite a distant goal, lawyers and bankers said.
That’s further complicated by several Myanmar tycoons being on a US sanction list, accused of making their fortunes by colluding with the former military junta, which was notorious for corruption and human rights abuses.
While the European Union ended sanctions this year, the United States has only suspended them.
The potential for resistance from Myanmar’s government, which is planning its own stock exchange, has also made some local businesses wary about tapping capital markets offshore.
To date, only one Myanmar firm has managed to list in Singapore – Yoma Strategic, which listed in 2006 through a reverse takeover.
The property and car sales conglomerate led by tycoon Serge Pun now counts Capital Group, Aberdeen Asset Management and Vanguard among its top 10 shareholders, and its share price has quadrupled since early last year on investor interest in the hot frontier economy.
It’s only natural that other Myanmar firms would want to follow suit.
“To this day in Myanmar, there’s no stock market, no bond market, no banking market to talk about. There are quite a few companies that are asset-rich but have no source of liquidity,” said Andrew Rickards, chief executive of Yoma.
But if corporate Myanmar is drawn by Yoma’s example, it is also wary of what happened to Zaw Zaw, one of Myanmar’s most powerful businessmen.
Singapore Exchange (SGX) effectively rejected in April a proposed reverse takeover deal in which Zaw Zaw would have injected his petrol kiosk business into bed linen retailer Aussino.
SGX said it was “unable to proceed with the review of the application, as major issues have not been adequately resolved”. Among these concerns, it cited Zaw Zaw’s placement on the US sanction list and the lack of clarity as to why he was on it. Zaw Zaw could not be reached for comment.
Myanmar’s corporate landscape is dominated by about 20 large conglomerates, with the biggest ones estimated to be employing as many as 30,000 people each.
For those and smaller Myanmar companies seeking funds, bank loans are often hard to obtain, with urban land usually demanded as collateral and interest rates high, said Aung Thura, chief executive of Yangon-based research and capital markets firm Thura Swiss.
The country does have an over-the-counter bourse, the Myanmar Securities Exchange Centre (MSEC), but it has only two listed firms. When the stocks are traded, which is very rarely, payments are normally made in cash.
A few companies have gone public, but not on the MSEC. Instead they sell shares from their offices or even in public places, letting people know by taking a newspaper advertisement or just through word of mouth, Aung Thura said.
While Myanmar’s government is working to establish a stock exchange by 2015 with the help of Japan’s Daiwa Securities, many in Myanmar business circles worry that the deadline may be pushed back.
Still, going offshore may risk incurring the displeasure of the government.
A senior executive at a Myanmar resources firm said several companies have been informally warned by authorities not to list in other markets such as Singapore. Myanmar officials have denied issuing such warnings.
For now, most Myanmar firms are reluctant to be too forthcoming about fundraising plans, preferring to keep their options open, which may also include partnering with a strategic or private equity investor.
City Mart, which runs Myanmar’s biggest supermarket chain, is considering a Singapore listing, but it is also weighing other alternatives, a company spokeswoman said.
Aung Zaw Naing, managing director of construction and hydropower conglomerate Shwe Taung, says his company’s plan “depends on the situation of the stock market that will emerge here soon”.