Here’s why you should learn about Myanmar before 2015

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Here’s why you should learn about Myanmar before 2015.

Looking back, it’s been 2 years since we spoke about Myanmar last.  We thought it may be an opportune time to provide an update on the happenings on the country, and what it means for you, as an investor.

Myanmar has been experiencing rapid growth, with 7.5% growth in FY2013 and a forecast for 7.8% in FY2014.  Ever since sanctions were lifted on the country, it has found itself in the midst of an economic boom.  The currency (Myanmar Kyat – MKK) has appreciated significantly since falling to a low of 1,350 per USD to under 1,000.  Myanmar received under $2bn in FDI in 2013, but is expected to exceed $100bn in FDY by 2030, according to McKinsey.

Myanmar has had various iterations of stock markets in its history, starting with first, the Rangoon Stock Exchange which operated in the 1930s.  The current markets is an OTC-only market that has two companies with tradable shares.  The Myanmar Securities Exchange Centre (MSEC) began operations in 1996 and never managed to gain traction.  Here, is a reasonably good summary from the website of the Central Bank of Myanmar about MSEC.

Yangon Exchange is planning to launch in October 2015.  This exchange will be a typical public equities exchange, and has already engendered considerable interest.  The Tokyo Stock Exchange (TSE) and Daiwa Group are responsible with the creation of the exchange, and of implementing internationally recognized best-practice for the exchange.  It will take many years for the exchange to establish itself and for Myanmar’s corporate culture to evolve and conform to international standards.  That being said, it will also be a great opportunity to invest in a country with immense potential and a population over 60mm (the 24th most populous country in the world).

Given no opportunities to invest in securities until the tail-end of 2015, now is a great time to become familiar with Myanmar and its potential.

To gain a sense of the scale of change underway in Myanmar, check out this regular feature which discusses the major events relating to Myanmar over the past week.  In the same theme, foreign banks are soon to receive licenses to operate in Myanmar.  Traffic in the once sleepy Yangon has created significant issues as the infrastructure struggles to keep up.   All of this however, is a good sign and a positive indicator for future investment potential.

Our thesis on Myanmar is quite simple and is outlined below:

  • Myanmar has 61mm people and a GDP per capita of only about $1,000 (it should be recognized that many would suggest that the grey and black market are a huge component of the actual economy.  As such, the actual GDP for Myanmar may be as high as 2,000.  Still a far cry from its neighbours China and Thailand.

 

  • Myanmar has a literacy rate of 92% and a reasonably good post-secondary education system

 

  • Myanmar is a mining rich country and many of these resources are yet to be discovered.  Modern exploration techniques for minerals have largely been absent from Myanmar.  When these are utilized it is likely to result in a significant upward revision to proven reserves for virtually every mineral

 

  • The country’s relationship with its neighbours, in particular to China should result in significant growth opportunities over the next few years.  Myanmar generated 70% of its electricity from hydroelectricity and has the potential to generate much more.  In the meantime though, Laos may be a useful source of electricity for the country.   Solving the electricity issue would provide a significant boost to growth in the country.

 

 

Further Reading:

Myanmar overview – Asia Foundation

Catalyzing Growth in Myanmar – Asia Society

Myanmar’ Moment – McKinsey

 

Post-script:

We visited Myanmar in 2007 and it was a completely different place than it is now.  It was a sleepy place with very little modern foreign international influence.   The country appeared to be peaceful for the most part.  We found the people to be very enterprising, and the cities are well structured to be able to take advantage of growth.  We are bullish on Myanmar and look forward to October 2015.

Please do let us know if you have any questions about Myanmar.  We would be happy to help you.

2 COMMENTS

  1. Growth projections and all the other bla bla bla are irrelevant if there are no instruments to invest.
    Currently there is no stock market in Myanmar and bank rates are governed by the central bank and fixed at 10% for 1 year deposits in local currency , hardly a bargain in my view.

    • Agreed on both counts. We’re looking at October 2015 for the opening of the local stock market (although delays are expected). Fixed deposits are not that attractive since they lack upside despite a lack of global yield, and the strict capital controls plus a current account deficit make us wary about the local currency. But the steps this country has taken recently are amazing, and as it opens up more we see a lot of potential here.

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