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Lao stock market to trade in kip only
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| The headquarters for Laos' first stock market are currently under construction. | The government will allow Lao kip only to be used for trading on the forthcoming Lao stock exchange amid widespread use of foreign currencies in the country.
Currently transactions by traders and businesses across the country are frequently made in foreign currencies, despite recent efforts by the Bank of the Lao PDR to promote wider use of the kip by quoting prices in the national currency.
The bank’s governor, Mr Phouphet Khamphounvong, told the Vientiane Times on Wednesday that the kip will be used for buying and selling shares on the stock market.
The use of the national currency is in line with the government’s policy to promote the use of the kip. The Lao currency has been strengthening against the US dollar and Thai baht since devaluing dramatically in 1997 during the Asian financial crisis.
In January 2006 there was 10,772 kip to the US dollar and 264 kip to the Thai baht, but now US$1 is worth 8,224 kip and 1 baht is worth 255 kip, according to the exchange rates of the Banque pour le Commerce Exterieur Lao (BCEL).
Mr Phouphet, who is also Vice President of the Lao Security Exchange, said that if foreign investors bring in the capital to buy shares they will have to change their money into kip.
The establishment of the first stock market in Laos is a joint venture between the Lao government and Korea Stock Exchange (KRX).
Mr Phouphet said that the joint venture company will open on October 10, 2010, but the stock market will open for transactions in January 2011.
An official from the Security Market Establishment Committee confirmed that the use of kip for trading stocks should not pose any problems, but if more foreign currency flows into the country it will make the kip stronger, which will cause problems for the export sector.
However, President of the Security Market Establishment Committee, Mr Dethphouvang Moularat warned: “We should be careful about withdrawing more foreign currencies out of the country in case investors sell off all their stock due to falling share prices, as a result of a stock market crisis.”
The country needs to have enough foreign reserves to bail itself out if there is a massive fall in share prices. Currently the foreign reserve is enough to cover imports for six months.
However, the committee will undertake some measures to manage fluctuations on the stock market by issuing some legal documents, according to Mr Dethphouvang.
Electricite du Laos and Banque pour le Commerce Exterieur Lao will be the first state enterprises to be listed on the stock market.
The central bank, on behalf of the government, reached a joint venture agreement with KRX on the stock market’s establishment in July 2009 in Luang Prabang. The government has a 51 percent share and the other 49 percent belongs to the KRX.
Located on Kamphaeng-Meuang road, Setthathirath district, Vientiane the stock market’s headquarters is currently under construction, and is 60 percent complete.
The Lao Stock Market is expected to provide multiple benefits to the national economy and boost production in the country.
Vientiane Times
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