June 4, 2012
The Laos Securities Exchange (LSX), one of the World’s newest and smallest stock markets, is setting up for rapid growth despite a vague legal framework and widespread ignorance as to its function among the Laotian people.
The LSX only started trading on 11 January 2011.
There are now moves to also establish an exchange in neighboring Myanmar.
Laos, Cambodia and Myanmar are all members of the Association of Southeast Asian Nations (ASEAN) whose original members, such as Malaysia, Singapore, Indonesia, Thailand and the Philippines, are now among the emerging economies in the region.
The LSX is a Joint Venture by the Bank of Lao, Laos’ central bank, that owns 51% of the exchange and the Korean Exchange (KRX) that owns the remaining 49%.
Similarly, the Cambodian exchange is a joint venture by the KRX and the Cambodian Ministry of Economy and Finance.
Since it started operation in Y 2011, only 2 companies have been listed in the LSX: Laos’ largest commercial bank, BCEL, and electricity company EDL-GEN. Both companies are majority state-owned.
The exchange itself is housed in a cavernous, largely empty, modern office building in the Lao capital Vientiane.
In a recent exclusive interview, LSX CEO and Chairman Dethphouvang Moularat said the LSX’s expansion plan would include the listing of new companies and introduction of an online trading system.
“In the near future, I think we will have new listed companies, such as the Enterprise of Telecommunications Laos and the Lao Indochina Group,” he said.
The online trading system, which the LSX hopes to launch soon, is designed to entice more foreign investments. At present, foreign investment is strictly limited by the government.
Under the current regulations, foreigners are allowed to purchase only 10% of listed companies’ shares and a foreign investor can hold only 1%.
Lao officials here have realized that only through foreign investments can the country hope to revitalize the local economy, create job opportunities for the Lao people, and raise its gross domestic product (GDP) by 8% next year.
The Lao government hopes to remove the country from its Least Developed Nation status by Y 2020 by luring private foreign investments.
But the biggest challenge for the exchange is the widespread ignorance as to its function among the Lao people.
The market currently has around 8,000 accounts of which only 50% are owned by the Lao people. Last year, the average daily trading volume was only about 150,000 shares, lower than predicted.
“Sadly, I don’t think the Lao people understand how to invest in the stock market since this is new to them. But we are trying to teach them little by little,” Chairman Moularat said.
Mr. Moularat is writing a Lao-English financial dictionary to help educate the Lao people about financial affairs and the stock market.
The LSX and the Lao Securities Exchange Commission will also be collaborating to provide training for the Lao people.
According to Mr. Moularat, the Lao government is now in the process of enacting a securities law aimed at relaxing restrictions on the entry of foreign investors to spur trading in the local stock market.
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