Japan takes lead in Myanmar capital market development

03 January 2014   Category: News, Asia, Japan, Myanmar   By Maya Ando and David Macfarlane

Asia Green Development Bank Limited (AGDB), a subsidiary of the Htoo Group of Companies, one of the major conglomerates in Myanmar, is aiming to be the first company to list on the stock exchange to be established in Yangon in Myanmar by 2015.

Myanmar Securities Exchange Centre Co Ltd (MSEC) – a joint venture company between Daiwa Securities Group Inc and Myanmar Economic Bank – and Daiwa Securities Co Ltd, entered an advisory agreement last year on December 2 concerning the listing of AGDB. This was an important milestone towards developing capital markets in the country, as was the enactment of the Securities and Exchange Law last July.

Under the engagement letter, MSEC and Daiwa Securities will provide advisory services in relation to the proposed stock exchange listing, including:

  • Advising on all aspects of the transaction to realise a successful listing;
  • Negotiating with financial regulators and the stock exchange in Myanmar;
  • Advising on Myanmar securities law and regulations;
  • Coordinating the work of professionals including legal counsel, public accountants and other professional advisors;
  • Advising on the medium/long term business and financial strategies, as well as the capital structure, of the listing company; and
  • IPO transaction management.

Takashi Hibino, president and chief executive officer, Daiwa Securities Group Inc, said at the time: “I am very pleased by the signing of this engagement letter among Asia Green Development Bank Limited, Myanmar Securities Exchange Centre Co Ltd, and Daiwa Securities Co Ltd (the investment banking arm of Daiwa Securities Group) in relation to a listing by Asia Green Development Bank on the stock exchange to be established in Yangon, Republic of the Union of Myanmar.

“Daiwa Securities Group is pleased to be actively involved alongside the governments of Myanmar and Japan in Myanmar’s important national project to develop its capital markets.

“The long, complex IPO preparation process will involve the coordination of a number of professionals, including investment bankers, accountants and lawyers, who will provide essential advice to the listing company in their areas of expertise. Based on our extensive IPO advisory experience in major equity markets in Japan and around the world, we will manage the entire process to ensure the success of the project.”

The economy of Myanmar has experienced remarkable growth in recent years in tandem with the country’s efforts towards democratisation. Continued economic growth will require the development of capital markets, including the establishment and development of a stock exchange.

Daiwa Securities Group, one of the largest brokerage firms in Japan, Japan's Ministry of Finance, and the Japan Exchange Group are assisting Myanmar’s government to establish a local stock exchange by 2015. The organisations are also helping the country form an exchange commission, which will serve as a supervisory agency and provide disclosure rules for listed companies.

However, local reports say completion of the new initiatives may be delayed due to a shortage of manpower and structural difficulties. One Japanese executive, who has been appointed to lead the project in Myanmar by Daiwa, tells Asia Asset Management that these issues could lead to postponements going forward.

Meanwhile, in December 2013, Japanese Prime Minister Shinzo Abe pledged 63 billion yen (US$610 million) to Myanmar to support the development of major industrial zones when he met Myanmar's president, Thein Sein, on the sidelines of a summit between the leaders of Japan and Southeast Asian nations in Tokyo.