The world’s smallest stock exchange opened last week in Cambodia and joins a growing cadre of tiny exchanges on the frontier of the developing world.
In places such as Laos (which opened its stock exchange six months ago), Mozambique, and Cameroon, just a few companies, literally, may be listed. But these bourses hold the biggest potential for trading in and on the future.
The markets these exchanges serve impact the lives and the livelihoods of thousands of people in more ways than just fostering financial value. Health care, education, and other social values will be lifted as well. Important stuff considering the high poverty rates in these nations.
To be sure, China and India are the go-to countries when people think of burgeoning economic growth and power. Africa and Southeast Asia shouldn’t be counted out, however. Indeed, some economists believe Africa’s growth potential alone could exceed that of the average growth predicted for the BRIC countries – Brazil, Russia, India and China.
Africa holds an abundance of the world’s natural resources – 13 percent of the world’s oil reserves, 50 percent of proven gold reserves, 50 percent of iron ore reserves, 60 percent of cobalt, and 90 percent of platinum group reserves, according to published reports. And as population growth strains the planet’s natural supplies of commodities, Africa and other natural resource-rich places will be able to cash in on their bounty. Southeast Asia has rubber, timber, palm oil, and a raft of other products to offer.
China is already showing its appetite for commodities and even land in Africa, as well as Southeast Asia. So rather than invest in the buyer, why not bet on the seller?
It’s impossible to invest with any of the companies listed on the Cambodian stock exchange because there are no companies listed on the Cambodian stock exchange. Next door in Laos, investors have the dizzying choice of two listings from which to choose: a bank and an electric company. Indeed, among the world’s dozen smallest exchanges, the most any one market trades in are 20 companies, and that’s in Syria — not a particularly stable place these days.
The world’s smallest exchanges are, in order of increasing size: Cambodia, Mozambique, Laos, Cameroon, Maldives, Cape Verde, Swaziland, Namibia, Libya, Armenia, Tanzania, and Syria. There combined market capitalisation is far less than 1 percent of the New York Stock Exchange.
On a percentage basis, however, I bet these scrappy markets will beat out anything the developed world has to offer. In fact, in the first days after opening the Laos exchange zoomed more than 80 percent. It dropped precipitously afterward, and remains volatile. Still, those bumps in the road are expected in such spunky places; it’ll be a long time before they are grown and tamed.
Take Mongolia. It’s another “seller” to the world because it’s rife with natural resources. Its stock exchange is gaining the attention of London and Hong Kong bankers, and many see it as the wild west version of Silicon Valley. This year it linked with the LSE, which will oversee its privatisation and operations. (The Financial Times recently dubbed Mongolia “Boomtown” because it’s one of the hottest destinations for resource investments today.)
So while the world’s smallest exchange in Cambodia may not have anything to trade just yet, it’s worth keeping an eye out for listings. It may be the only investment market in the world where it’s safe to say right now that things can only go up.