Laos Securities Exchange, the world’s newest bourse, is due to start trading on Tuesday with two listed stocks and bold plans for expansion.
Trading will open with shares in EDL-Generation, which is controlled by the state-owned power company Electricite du Laos, and Banque Pour Le Commerce Exterieur Lao, a state-owned bank.
The two companies launched their offerings at the end of last year. Although there have been no official figures, investors say they believe the issues were two times oversubscribed. The government floated 25 per cent of EDL-Generation shares and 15 per cent of BCEL’s stock, and hopes that as many as five other companies will list before the end of the year.
Laos, a land-locked country of 6.3m with a per capita gross national income of just $880, is a backwater among south-east Asia’s booming economies, but it is starting to catch up. The economy grew 7.7 per cent last year and is expected to show similar expansion in 2011.
“The growth prospects of the Lao economy are at or above the regional benchmarks,” said Damian Bell, chief executive of ANZ Vientiane Commercial Bank. “There may be bumps on the way, but I think their long-term planning is solid.”
Investors are starting to look for opportunities despite the country’s lack of infrastructure and a degree of political risk in a one-party communist state that has only recently relinquished its belief in a command economy.
In 2009, China’s Minmetals took over the Sepon gold and copper mine, the country’s largest single commercial operation, as part of its $1.3bn acquisition of assets owned by troubled Australian miner Oz Minerals.
“It is a very exciting place to invest. It was completely unaffected by the financial crisis and is benefitting from a lot of spill-over from China. It is at the centre of a very dynamic region and it has a lot to offer the region,” said Douglas Clayton, chief executive of Leopard Capital. Leopard, a Cambodia-based fund manager that specialises in south-east Asia’s frontier markets, has taken a stake in EDL-Generation.
Growth is being fuelled by regional demand for hydroelectricity and metals, principally gold, copper, zinc and lead, and Laos is starting to open up, but its financial infrastructure is comparatively undeveloped. The new bourse has been built with South Korea’s stock exchange, which owns 49 per cent of the Laotian Securities Exchange, and has provided funds and technical expertise.
Mr Clayton thinks it will take at least a decade before the exchange finds its feet, but that the country’s communist government is enthusiastic about the experiment, despite it not commenting officially on the opening and the exchange not having a website.
“Their ambitions will need more capital than the government can provide. The stock exchange becomes a way to mobilise local and foreign capital, so the government will be the beneficiary of a successful stock exchange and they will support it,” he said.
Mr Clayton believes that even if the exchange lacks depth, it will have important secondary effects on the country’s opaque corporate culture.
“The listing process bring a different degree of transparency than what one would have seen historically in Laos and that is one of the great things about having a stock exchange,” he said.