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Analysis Myanmar Economy

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Will Yangon's stock exchange revitalise Myanmar?

People wait at Yangon Stock Exchange (YSE) in Yangon, Myanmar March 25, 2016. REUTERS/Soe Zeya Tun

Myanmar's first modern stock exchange officially started trading on Friday, with just one company listed so far. The news comes days before Aung San Su Kyi's new government takes office, and seeks to modernise the country after decades of military rule.

Myanmar’s much awaited stock exchange opened to a cheering crowd assembled at its restored colonial-era building in downtown Yangon.

The inauguration illustrates the country's drive to bring its economy to life, following the election of Aung San Suu Kyi's pro-democracy party last month.

The event was laden with symbolism, as Myanmar finally leaves the tiny club of nations without a functioning stock exchange, after decades of military isolationism.

The country's business elite celebrated the news accordingly.

The head of Myanmar's Securities and Exchange Commission, Maung Maung Thein, said it marked a "great day" for the country, and that he could now proudly proclaim to the world that Myanmar is no longer a "backward nation".

But will the new trading activity have a significant impact on the country's economy?

So far only one firm is listed on the market - First Myanmar Investment (FMI) - and the bourse is currently restricted to domestic investors.

Some analysts are comparing the Yangon Stock Exchange to the ones in Cambodia and Laos, which have until now only listed three companies between them.

But others are more optimistic.

“You get take-off quite quickly”, says Ben Southwood, from the Adam Smith Institute in London.

“What we’ve seen across other South-East Asian countries is that as soon as they start implementing market reforms they have the capacity to grow very quickly, and sustain a lot of corporation trade. […] I’m quite hopeful.”

At the opening ceremony on Friday, Myanmar tycoon Serge Pun, who runs FMI, said the new stock exchange will help companies access vital capital in order to develop.

But in a country where a quarter of the population lives below the poverty line, the big question is whether the financial activity will trickle down to ordinary Burmese people.

A boost in investment should increase the country’s production, which in turn is likely to bring new job opportunities to Myanmar's struggling citizens. But the break-through could take some time before it yields results.

“Stock markets aren’t just a side show,” says Southwood. “When a company’s stock market capitalisation rises, that money turns into real investment. That’s what leads to higher productivity, and higher productivity leads to higher wages.”

Myanmar is still one of the poorest countries in South-East Asia.

But it also boasts abundant natural resources, such as industrial minerals and natural gas, and is well positioned geographically, between India and China.

Myanmar's semi-civilian government has spent the last five years trying to transform a state-controlled economy into a vibrant free market.

A series of reforms have already started to open up the economy, and attract much-needed foreign investors.

When it takes office next week, it will be up to Aung San Suu Kyi's new government to continue with the market reforms, and bring Myanmar into a new economic era.