Investment funds in the region said yesterday that injecting capital into Cambodia’s forthcoming bourse would depend on the ability of businesses here to achieve robust accounting standards and high levels of transparency ahead of July’s tentative launch date for the market.
Experts say that the three state-run companies that have been confirmed as candidates to list on the bourse still have much work to do before they can comply with regulations on corporate governance, auditing standards and transparency.
“I think it is going to be a steep learning curve not only for the fund managers but also for the locals,” said Sany Zainudin, a fund manager at MIDF Amanah Asset Management Bhd, a Malaysian firm with total funds of $650 million.
A total of 32 fund managers from Malaysia, Singapore, Hong Kong, Indonesia and Vietnam and representatives of 25 private companies attended a conference in Phnom Penh yesterday organized by OSK Indochina Bank and the Securities Exchange Commission of Cambodia to learn about the stock exchange’s legal framework and investment opportunities in Cambodia.
OSK Indochina is among 15 companies awarded licenses to trade on the stock market last week by the SECC. Companies with a potential interest in listing on the bourse attending the event included Royal Group, Comin Khmere, Chip Mong Group, Mong Reththy Group, Seng Enterprise, Vattanac Bank, Canadia Bank and Acleda Bank, said Iv Ranarith, a research analyst at OSK Indochina.
Mr Zainudin said that one of the most important issues for funds looking to invest in Cambodia was easy access to the market and high levels of liquidity.
Investors also need to be sure that companies planning to list “are actually representing the economic growth of that country,” he added.
In some countries, he said, market capitalization is huge and the number of listed companies is in excess of 1,000, but capital inflows to the market may not be justified by the real economy.
In some cases, “the depth and breadth of the stocks representing the economic activity of the country is not moving in tandem” with the level of economic activity, he said. “So you get mixed signals to the investors.”
Speaking to an audience of fund managers and members of the private sector yesterday, Aun Porn Moniroth, secretary of state at the Finance Ministry and Chairman of the Supreme National Economic Council, said that for the stock market to generate capital, foreign investors would need to be convinced that the Cambodian bourse is open only to those companies willing to comply with strict financial regulation.
“Sustainable economic development requires support from the financial sectors,” he said.
Ming Bankosal, director general of the SECC, echoed Mr Porn Moniroth’s views and said that the presence of so many fund managers proved that interest in Cambodia’s forthcoming bourse was increasing in the region.
“The presence of the fund managers is a positive sign for the start of the forthcoming operations of the stock market in Cambodia,” he said.
But first, experts say, companies still have some work to do.
“What we need to do is actually prepare the Cambodian companies for listing,” said Leong Yeng Kit, director of OSK Indochina in Cambodia. “However, a lot of them have limitations in terms of accounting irregularities.”
He said there were “a select few companies” that ready to list, pointing towards the major banks in the country. However there are also businesses that have a lot to do in order to meet accounting standards desired by potential investors.
“Fund managers having invested in markets overseas are very accustomed to transparency and audited accounts,” he said.