Stock market opens for business in communist nation
Communist Laos opened a modest stock market today, hoping to attract capital to its largest enterprises and boost the economy of one of the world’s poorest nations.
The Lao Securities Exchange is initially offering shares in just two state-owned enterprises – Electricite du Laos Generation Company, the country’s major energy company, and the Banque Pour Le Commerce Exterieur Lao, official Lao media said. Foreign participation will be limited.
Lao Star television showed a small opening ceremony at the exchange in the capital of Vientiane.
South Korea’s Korea Exchange is investing 9.8 million US dollars, or 49% of the venture, most of it for technology systems and training, according to the Seoul-based stock market operator.
The Bank of Laos, the country’s central bank, is investing 10.2 million US dollars, or 51%.
Neighbouring Thailand also offered assistance.
“There’s a two-fold reason. The exchange will allow an alternate source of capital other than banks and allow public participation in the growth of the economy,” said Lorraine Tan, director of equities research at Standard & Poor’s in Singapore.
“A broad capital market will certainly help economic development.”
But she said that it would take some time for foreign equity to flow in. “You just can’t do that by opening up a stock market,” Ms Tan said.
The Vientiane Times, a state-run newspaper, quoted a securities executive as saying that foreign individuals will be able to buy a maximum of 3% of shares issued by EDL while foreign companies and institutions will be able to purchase up to 10%.
Hinphet Chanthalansy, deputy director of BCEL-KT Securities, said a number of foreign enterprises, especially Thai power companies, have expressed interest in EDL.
He said shares in the company were oversubscribed by foreign investors during the recent initial public offering.
The newspaper said exchange officials say foreign ownership had to be limited to keep the inflow and outflow of foreign currency stable, one of the main drivers of the Lao currency, which is known as the kip.
Foreign investors trading on the Lao exchange must use Lao kip for all transactions.
The Lao government has committed to keeping the value of the kip within a 5% range this year. The kip has increased in value against the US dollar in recent years but depreciated against the Thai baht.
The KRX said it is also working to establish the Cambodia Securities Exchange expected to open in July and helped set up the Ho Chi Minh Stock Exchange in Vietnam.
