Fascinating piece regarding the volatility of certain, newfound Southeast Asian stock exchanges, including Laos’ Vientiane-based bourse which surged 86.5% within the first two and half weeks of trading back in January before dropping 17.4% in the four days thereafter.  Leopard Capital’s Douglas Clayton notes that thin volume and uncertainty among investors regarding the valuation of the two listed firms–Electricite du Laos Generation (EDL) and Banque Pour le Commerce Exterieur Lao (BCEL)–remains the chief culprit.  Meanwhile, to the south “Cambodia’s economic recovery continues to gain momentum,” the firm notes in its latest newsletter, “ramping up from a flat 2009 to grow by 5.5% in 2010 [and a projected] 6-7% in 2011.  Core sectors reasserted their strength last year and are posed to build on these gains in 2011: garment exports surged 26% to a record $3 billion; tourism roared back with 16% growth in arrivals, rising to 2.5 million; Agriculture kicked back in across several sub-sectors with rubber topping growth for the sector at 43%, bringing output to 50,000 tons.”  Clayton et al. await the imminent opening of Cambodia’s own exchange in July in which Telecom Cambodia, Sihanoukville Autonomous Port and Phnom Penh Water Authority will all float–though several kinks have yet to be addressed which should leave most investors with pause.  For instance, while analysts expect that unlike with Laos there will be relatively fewer regulations vis a vis foreign equity ownership–yet another cited reason fueling the hitherto mentioned volatility–some “have expressed concerns over vague market regulations in relation to accounting standards, among other issues.”  Moreover, though Laotian officials ultimately opted for equities to be listed in kip rather than dollars, investors flinched when the Securities and Exchange Commission of Cambodia (SECC)–against a strong case not to do so, as laid out in February by the WSJ–chose to do the same with the comparatively weaker riel, a fledgling currency of sorts (though admittedly, in absolute terms the riel has increased in volume over the past five years) that may have interminably fallen prey to the dollarized pit of no return which causes Cambodia to essentially sway in the wind of U.S. monetary policy according to the IMF’s Nombulelo Duma.  That said, dollar settlements will be permitted for up to three years, though what that will effectively do for the country’s quest to de-dollarize is anyone’s guess.  History suggests the process already “is not easy” since it, per Duma, “requires persistence in reducing inflation and stabilizing macroeconomic policy.”  Even “experts” a la Mervyn “the Swerve” King can attest to just how tedious an affair that can be.

 

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