Myanmar coup may see investors exit; currency may weaken: analysts

Singapore

POLITICAL unrest in Myanmar could spell trouble for Singapore-listed companies with a presence there, as the country's business environment takes a turn for the worse.

"With political stability being upended, the business environment is likely to turn for the worse," said Phillip Securities analyst Tan Hui Jie. "Investors might flock from the country, and its currency may also weaken - which can negatively impact companies with presence in Myanmar."

Amid the chaos following the military's seizing of power, phone and Internet connections in capital city Naypyitaw and the main commercial centre of Yangon were disrupted. The state television also went off air after leaders of the National League for Democracy, including Aung San Suu Kyi, were detained.

Several Singapore-listed companies have suffered as a result of the multiple disruptions.

Yoma Strategic is among the local firms with a bulk of its operations in Myanmar, with business in sectors such as real estate, food and beverage, automotive, financial services, as well as investments. Amid the chaos, a Yoma spokesperson told The Business Times that it has asked employees to "work from home for the next couple of days and take any necessary precautions to be safe".

"Some of our businesses are being disrupted intermittently due to outage in the telecommunication network, and our business heads are working closely with our frontline staff to monitor the situation closely," added the spokesperson.

In its 2021 Singapore strategy note, Phillip Securities had listed Yoma a "proxy for Myanmar's fast-growing economy, consumption and digitalisation of financial services through its KFC franchise, property development and fintech arm, Wave Money".

Phillip's Mr Tan said the brokerage will be observing the company closely as the situation unfolds, although its essential services continue to remain in operation.

He warned, however, that "any unfavourable outcome is likely to impact valuations for the counter", and could also adversely affect or delay the investment plans of Philippine conglomerate Ayala Corp to take a 20 per cent stake in Yoma and First Myanmar Investment (FMI) - a Yoma-linked company.

Member banks of the Myanmar Banks Association were also asked to shutter from Feb 1. Two out of the three lenders in Singapore - OCBC and UOB - have operations in Myanmar. DBS has only a representative office in Yangon and was hence not impacted.

In response to queries from BT, OCBC's head of operational risk management Patrick Chew said the bank will continue to support its customers' banking needs notwithstanding the "intermittent disruptions in telecommunications".

"Since the Covid-19 outbreak last year, our Yangon branch has implemented split operations. We will continue to monitor the situation, bearing in mind that the safety of our staff and customers are of paramount importance," added Mr Chew.

UOB also confirmed that it has closed its Yangon branch temporarily, in line with guidance from the authorities.

Some companies are waiting to see how the situation pans out. Real estate management firm LHN Group's deputy managing director Jess Lim declined to comment further as the company is still monitoring the developing situation.

Similarly, chief executive of Singapore Myanmar Investco Mark Bedingham declined to comment at this stage but noted that the company's operations in Myanmar have been on a "restricted basis" prior to this due to the pandemic.

Others have said it is still business as usual for them.

A spokesperson for Keppel Land, the property arm of conglomerate Keppel Corp, said there has been no disruption to its operations thus far and it is monitoring the situation closely. Keppel Land owns commercial properties across Yangon, including a stake in the Junction City Tower in Yangon's central business district. It also owns and manages Sedona Hotel Yangon. (see amendment)

Newly-listed Credit Bureau Asia (CBA) launched Myanmar's first credit bureau - Myanmar Credit Bureau (MMCB) - on Dec 30 last year. This is a 60:40 joint venture between MB Investment, a company formed by members of the Myanmar Banks Association, and CBA's wholly-owned subsidiary NSP Asia Investment Holding.

Koo Chiang, CEO of the company, said plans to introduce credit and risk information to the Myanmar market over the next two years currently remain unchanged.

"Traditionally, credit bureau products and services are essential tools used by financial institutions for credit risk management; and as the sole credit bureau licensee currently, MMCB's products and services will continue to be relevant," said Mr Chiang.

He added that CBA's current operations have not been affected by the current situation in Myanmar, and the company is not expecting a "material impact" as things stand.

Soilbuild Construction Group in a bourse filing on Monday evening said that while the situation remains uncertain, it is currently not aware of any potential termination of its currently ongoing projects.

Although companies here might have exposure to Myanmar, Oanda's senior market analyst for the Asia-Pacific Jeffrey Halley said the fallout will be limited as companies are unlikely to "put all their eggs in one basket" when it comes to turnover and profits.

"Myanmar is very much a frontier market still, with any direct investments mostly likely via joint ventures with local partners.

"Companies with a heavy presence there are more likely to face the issue from an ESG (environmental, social and corporate governance) perspective, with institutional investors questioning whether remaining there implies tacit support for the military regime," said Mr Halley.

READ MORE: Myanmar economy suffers another setback with military coup

Amendment note: An earlier version of the article stated that Keppel Land owns both residential and commercial properties in Yangon, when in fact the company only owns commercial properties.