Preparations for the launch of a standalone stock exchange in Brunei Darussalam look to be moving ahead, supported by progress on a regulatory framework for the bourse.
The Sultanate’s long-awaited exchange could open as early as next year if the groundwork is in place, according to the Autoriti Monetari Brunei Darussalam (AMBD), which oversees the country’s financial sector and is developing regulations to govern the bourse.
Officials see a national stock market as pivotal in Brunei Darussalam’s plans to develop its capital markets and boost foreign inflows, and is also in line with a broader push to diversify the economy away from hydrocarbons.
Focus on financial services
The importance of harnessing private sector participation in the Sultanate’s economic development was a key theme in the official address given by His Majesty Haji Hassanal Bolkiah, the Sultan and Yang Di-Pertuan of Brunei Darussalam, in early March at the opening of the 12th session of the Legislative Council.
According to Yusof Haji Abd Rahman, managing director of the AMBD, in this sense a local stock market could “act as a significant catalyst” for economic growth.
Speaking at an event organised by the Brunei Association of Banks in early March, Rahman told participants that a stock exchange would strengthen the financial industry and boost its contribution to GDP.
“Companies in the country will have alternative funding avenues other than bank loans,” he noted. “It will also provide a platform for Bruneians to invest in shares conveniently.”
Expanding the financial sector is one of the objectives mapped out in Brunei Darussalam’s long-term national vision, Wawasan 2035. As part of the programme, which was launched in 2008, the Sultanate is looking to boost the sector’s contribution to GDP from 5% in 2015 to at least 8%.
Laying the groundwork
While the idea of launching its own bourse has been a subject of discussion for several years, 2015 brought concrete signs of progress from the AMBD. Commenting in May, the regulator said it was hopeful that the preconditions required for launching a security exchange could be met by 2017.
Speaking late last year, Pehin Dato Suyoi Osman, the minister of development, said that the launch of a stock exchange was “expected to contribute significantly” to the expansion of Brunei Darussalam’s financial sector.
The minister noted, however, that both the AMBD and the Ministry of Finance needed to ensure the necessary groundwork was in place ahead of a launch, particularly in terms of legal and physical infrastructure, investor protection and public awareness.
While the AMBD has signalled that the bourse will initially focus on equities trading, bonds and sukuk (Islamic bonds) could be added at a later stage.
Private sector support
While state agencies are leading the push to establish a regulatory framework for the exchange, the private sector is also helping to raise public awareness about equity investment.
Investment firm Baiduri Capital, a subsidiary of Baiduri Bank, held a series of seminars in January on financial analysis and security trading. This followed on the launch last year of the company’s stock trading portal, which allows Bruneians to trade on the exchanges of Singapore, Malaysia and Hong Kong.
Officials from the bank have welcomed plans to open a domestic exchange, saying it would both allow Bruneian firms access to capital and provide opportunities for locals to invest in the national economy.
“It might not be easy to identify many companies interested [in] list[ing], because Brunei Darussalam is small, but I think there are some,” Pierre Imhof, CEO of Baiduri Bank, told media last year. “I think it could definitely put the country in a different playground in terms of business development, especially in the financial sphere.”
With Brunei Darussalam’s relatively small size likely to limit listings early on, state-owned enterprises could have a role to play in driving the exchange’s development in the initial stages.
Banks, tourism operators and manufacturers have been cited as among the private sector players to be targeted to listing. In time, the exchange could also provide avenues for small and medium-sized enterprises, which account for a significant portion of the private sector, to raise capital and fund expansion.