Leopard Capital Fund Manager, Thomas Hugger of Leopard Asia Frontier Fund and Managing Partner of Leopard Capital LP, goes through some of the major difficulties faced in various frontier markets in Asia.
The hurdles start from very basic things, when last year I made my first trade in Mongolia, I called up the firm I wished to trade with. It was very difficult to reach a person because the fixed line was poor. So I had to call a mobile. I placed the order and I had to confirm it by email. There are some rules in Mongolia that mean that the broker can only place the order in the system if he has it written and signed, and it has to be on an order slip and the client has to sign it. So the broker sent me print-outs of the order sheet, which was in Mongolian. Then I had to sign it and to scan it and email it back and then the order was placed. In some markets people compete for nano-seconds, and this trade took me hours.
In Mongolia, I don’t have live prices on Bloomberg, so I found a website that has a five minute delay. I always check the prices online and I always place limit orders because the spreads can be more than 100%.
In Vietnam it took me seven months to get a trading licence. There is no standardisation of the process between any of these markets. When you have to go back and forth it can take a long time.
Look at Laos, it’s a communist country. Laos and Cambodia, Cambodia has one stock at the moment and Laos has two. People go to Thailand where it’s a free country. You don’t need an ID, but in Cambodia and Laos, you do. So they are investing a lot of money in technology and people and they don’t make money.
Then you consider the ASEAN link and from a commercial point of view, those countries don’t have a stock exchange. It took Cambodia three or four years to get it off the ground. I don’t know how much money they sunk into this project and with the link it could limit trading in this market.