Laos stock market has good future prospect

The Lao government didn't just have an eye on business profit, it also wanted to create a new tool to mobilise investment capital by opening the securities exchange, said a top stock market official.

Lao Securities Exchange Chairman and CEO Dethphouvang Moularat made the comment on Monday in response to public concerns about whether setting up the stock market had been a worthwhile investment. Only two companies have listed on the market and the trading value is very low.

The stock market's main income comes from the provision of transaction services for stock traders and the lease of offices. The low trading value has caused the public to wonder whether the several million dollars that went into the venture have been well spent.

Dethphouvang admitted that the Lao-Korean joint venture did not make a profit in its first year of business. But he said this was of no concern because the main purpose of the stock market was to make a profit in the long term, not in the short term.

The stock market expected to make a profit within the next 10 years or sooner if business boomed, he said, adding that ETL, Lao-Indochina Group and Lao World Group are expected to list this year.

A number of companies have expressed interest in listing on the stock market to mobilise investment capital but Dethphouvang was unable to give their names because they have not yet submitted an official request.

The participation of more companies in the stock market would encourage more people to buy shares, which would enable the market to make a profit sooner rather than later, he said.

The main purpose of the stock market was to give businesses another source of capital for growth, which in turn would help the government to create more jobs for Lao people.

As nearly every other country has a stock market, it was impossible for Laos to avoid doing likewise as it seeks to become internationally integrated.

Dethphouvang said the stock market had benefited Laos because in the past businesses could only obtain investment capital from banks, which could offer only short term assistance.

The stock market had an important role to play in helping the government to source investment capital for continued high GDP growth.

Laos needs US$15 billion over the next five years to secure annual GDP growth of at least eight per cent, of which 50 to 60 per cent will come from private investment.

Dethphouvang said the government had a number of measures in place to buffer the country against international stock market turbulence. These included limiting the rights of foreigners to own shares on the Lao stock market, which would prevent the rapid inflow and outflow of foreign reserves.

There are also measures to prevent investors from taking ownership of companies through the stock market. Many other countries allow investors to buy shares that give them ownership of a company.

Indonesia's private jet demand soars.

Business is booming for Indonesia's luxury jet charter firm Enggang Air Services and the company's CEO Donnie Armand tells CNBC he is planning to expand his fleet size to meet the growing demand.

"Private jets in the United States average 30-50 hours of flying time per month, we average around 75 hours per month, well above the industry," said Armand, adding that Enggang is going to place orders for two 20-plus seater business jets this week, bringing its fleet size to 6.

According to Armand, Indonesia will take delivery of an estimated $500 million worth of private jets this year. The country already has an estimated 18 jet charter companies operating in the domestic market, and this number is climbing.

Jakarta-based budget carrier, Lion Air is the latest Indonesian company to announce an order for private jets. The airline, which plans to launch its own private jet charters, confirmed on Wednesday at the Singapore Airshow that it had purchased two Hawker 900XP mid-sized business jets fora list price of $64 million, with options for two additional aircraft from the U.S-based manufacturer.

With this growing interest, international jet manufactures are identifying Southeast Asia's largest economy as a key target market in the region, in addition to China and India.

"I would single out Indonesia as the strongest market in Southeast Asia. It's been that way for the past 24 months, and going into 2012, I think it's going to continue to lead the region," said Pasha Saleh, Regional Sales director, Southeast Asia at Hawker Beechcraft.

Jose Costas, vice President for Marketing & Sales, Asia Pacific, for Brazil-based aircraft manufacturer Embraer, says that alongside the country's growing wealth, the topography of Indonesia is a large driver behind private jet travel.

"With over 17,000 islands spanning over 3,000 miles, companies need an efficient mode of transportation to shuttle employees between their headquarters and the locations of the mines, for example," Costas said.

Corporate executives in the mining, oil and gas and agriculture sectors are currently leading the demand for private jets.

"The demand for travel is enormous and the (domestic) airline network is not there yet," Costas added. Embraer, the fourth largest aircraft maker, has sold 8 executive jets, ranging from a list price of $9.5 million to $54 million, in the country since late-2004.

Asia, as a whole, currently remains a relatively small private jet market compared to the rest of the world, but the region will account for 16 percent or $40 billion of total orders over the next 10 years, according to industry estimates.

Pleasure Jets

While business travel makes up 90 percent of private jet usage in Indonesia, charter companies and manufactures are seeing growing interest around non-business, private jet travel by high net worth individuals looking for a weekend getaway. The country's millionaire population is set to treble to 100,000 by 2015 according to a report by CLSA and Julius Baer.

"High GDP growth has resulted in an increasing number of high net worth individuals who can afford this kind of luxury," Armand said, adding that some of the most popular destinations include the Maldives, Alice Springs and Phuket.

A 5-hour journey from Indonesia to Maldives on a chartered 14-seater private jet could cost up to $100,000 or approximately $7,100 per passenger, he said. This is around double the price of a Singapore Airlines business class ticket ($3,757) to the same destination.

Limitations to Growth

While prospects for the private jet sector in Indonesia are bright, industry experts say it is crucial for infrastructure surrounding private jets to improve in order for the segment to realise its full growth potential.

"A lot of the (smaller) airports that are developed don't necessarily have runways long enough to support some of the bigger (20-seater) airplanes," said Saleh.

However, Saleh says there are positive signs that indicate the government is moving in the right direction. The government's flight inspection division recently purchased a private jet to fly to different airports to check on safety conditions. "It's an indication of the government's willingness to meet demand," he said.

(source:CNBC)