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.