Weekend Comment Apr 5: On cue the Myanmar gold rush

A NEW ERA has dawned in Myanmar. After two decades of being silenced, the pro-democracy activist and opposition leader Aung San Suu Kyi has led her party to a landslide victory, winning at least 40 out of 44 seats in a parliamentary by-election despite being just one out of 17 political parties in the contest. Encouraged by the progress the country is making, the US says it is easing sanctions and restrictions on doing business in Myanmar that have been in place since 1988.
This is perhaps just the signal that investors worldwide have been waiting for. In the eyes of infrastructure and property developers, manufacturers, oil and gas and natural resources companies, Myanmar is Asia’s last untapped frontier and opportunities abound.

 

In a key financial reform, the government has adopted a managed float of the local currency, scrapping a 35-year fixed exchange rate. The kyat opened trading on April 4 at Kt818 to the US dollar, a far cry from the former official rate of Kt6.4 to the dollar. The move also allows the government to intervene against expected heavy inflows of foreign investment dollars and aid that could push up inflation.

 

Indeed, there has already been a constant flow of foreign business visitors into the country, following US Secretary of State Hillary Clinton’s visit last year. In February, Singapore’s business development agencies, International Enterprise Singapore and the Singapore Business Federation, led a large delegation of Singapore company owners and businessmen from the construction, infrastructure, oil and gas and finance sectors. 

According to DMG Research, there are three Singapore-listed companies that offer investors the opportunity to ride on Myanmar’s development, and which have gained an average of 14%, compared to the benchmark STI’s 1%. 

 

Interra Resources, which is mainly involved in the exploration and extraction of petroleum in Myanmar, derives some 70% of its turnover from the country. Interra’s stock has risen more than 6% on Thursday.

 

Super Group, the instant coffee maker, is a household name in Myanmar and is estimated to have more than 30% of market share. For FY11, about 16% of its turnover came from Myanmar. The stock hit a 52-week high on April 4.

 

And real estate developer Yoma Strategic, run by Myanmar-born businessman Serge Pun, derives more than 90% of its revenues from the country. Shares in Yoma have already jumped some 150% this year, but got a further boost from the news of the easing of sanctions, and hit an all-time high on April 5.

 

Separately, one stock that hasn’t been doing so well over the last few days is DBS Group Holdings. The counter has fallen 6% over the week, since it said it is buying a majority stake in Indonesian bank Danamon from Temasek Holdings for $6.2 billion. DBS’s aim is to get a hold on the Indonesian growth story – the economy is expected to grow by more than 6% over these next three years. But not everyone is convinced the deal is a good one. Moreover, legislators, investors and bankers in Indonesia have voiced opposition to the takeover, and while there are no regulatory obstacles for now, it remains to be seen whether the issue would be a hot button in the run up to the 2014 presidential election.