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Laos forms stock exchange, plans start of share trading in 2011
Laos, the smallest economy in Southeast Asia, is starting its first stock exchange to provide local companies with an avenue to raise funds for expansion and investment, the bourse’s chief said.
The stock exchange will start trading shares “some time” in early 2011, Dethphouvang Moularat, Chairman and Chief Executive Officer of the Lao Securities Exchange, said in a telephone interview from Vientiane yesterday. The bourse will be officially established this week, he said, declining to give the specific date.
Landlocked Laos is seeking global investors to help pay for infrastructure projects and create jobs for its 7 million citizens, nearly half of whom are younger than 16. Rio Tinto Group and Electricite de France SA are among companies that have boosted investments in mines and power plants to tap into the nation’s rivers and other natural resources.
“Having a capital market will greatly help domestic companies raise expansion capital,” said Douglas Clayton, Phnom Penh-based chief executive officer of Leopard Capital, which manages about $34 million of assets in Cambodia. “It will also stimulate the growth of a private equity industry because an IPO can create an exciting exit route for such funds.”
Laos’ economy may expand 7.5 percent in 2011 from an estimated 7.4 percent this year and a 5.5 percent pace in 2009, boosted by electricity sales to Thailand and higher prices of copper, gold and silver, the Asian Development Bank said in a report on its website.
‘Stepping Stone’
Rio, the world’s third-biggest mining company, and Mitsui & Co. are jointly exploring bauxite and other minerals in Laos, the two companies said in August. Electricite de France, Europe’s biggest utility, and its partners operate a 1,070- megawatt hydro power plant in Laos, the country’s largest.
“The stock market is the key stepping stone for the country’s economic development,” said Dethphouvang. “The need for new capital has increased significantly with expansion of the economy and investments.”
Dethphouvang declined to say how many companies may be listed when the exchange starts trading shares. In neighboring Thailand, about 478 companies are publicly traded on the main board of the nation’s bourse while Vietnam’s Ho Chi Minh Stock Exchange has more than 260 listed stocks.
“The challenge is to educate retail investors about the basic principles of company valuation so the exchange does not start to resemble a casino,” Leopard Capital’s Clayton said. “Most emerging markets have gone through a hyper-speculation phase at one time or another, and the inevitable massive correction can crush investor interest for a long time.”
Clayton said in August Leopard Capital plans to raise about $50 million to invest in Cambodia and Laos. The company plans to open a representative office by the end of this year in Vientiane, the capital of communist-run Laos, he said.
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