Ministry: Stock Exchange on Track Despite Crisis

As the world’s financial markets continue to grapple with the ever-heightening economic crisis, Cam­bodia—with the backing of South Korea—took a significant step forward Thursday toward opening its own securities exchange market.

The Ministry of Economy and Finance and the Korea Exchange, the South Korean government’s stock exchange operator, for the first time unveiled a progress report on Cambodia’s forthcoming stock market and outlined criteria for be­coming a business listed on that bourse.

Several hundred people representing many of Cambodia’s leading companies attended the first segment of the two-day gathering at the InterContinental Hotel in Phnom Penh.

Leaders acknowledged that up­heaval within the globe’s financial markets creates a potentially stormy backdrop for opening Cam­bodia’s exchange by the target date of late 2009, but both Finance Min­ister Keat Chhon and Sung-hee Hong, executive director of global business development for the Korea Exchange, expressed optimism Thursday.

“The launch of [the] securities market in Cambodia is [set] in the stage of world financial crisis, especially in the rich countries, where this problem will lead to the general downfall [of the] world economy,” Keat Chhon said during his key­note speech. This creates a learning opportunity and a need to “step forward very carefully and solidly with this task,” he said.

Hong also recognized the need for caution: “We should take very careful steps as a result of the financial crisis, but our target [launch] date is the end of next year, so while we will definitely fine-tune the timing of the launching of the securities market in Cambodia, we hope that by the end of next year the economic crisis will be over,” he said in an interview during the conference.

Thursday was also essentially the public debut of the new Securities Exchange Commission of Cambodia, which was formed in July and is chaired by Keat Chhon. The body is in the process of creating a regulatory framework that will be used to manage and supervise the issuing and trading of securities. It will also be responsible for licensing securities companies, such as brokers and financial advisers, and enforcing relative laws, among other duties, according to SECC Director-General Ming Bankosal.

Both private companies and state-owned enterprises will be eligible to be listed on Cambodia’s stock market, though the application process will include a strenuous review and stringent standards, he said. Requirements to become a listed company will include abiding by international accounting standards, publicly releasing financial statements, fulfilling tax obligations, and proving “corporate governance and transparency” in order to “show accountability of decision-making,” Ming Bankosal said.

Public-limited companies will also likely need to have an independent, non-shareholding director, he added.

And Mey Vann, director of the Finance Ministry’s Financial Industry Department, said tentative plans require companies to have been incorporated for at least two years, and have capital stock of $1 million or shareholders’ equity of $2 million. Companies will likely also be required to be profitable within the past two years, and be 10 percent owned by minority shareholders.

In-pyo Lee, a locally based project director for the Korea Exchange, said the Cambodian exchange will probably start with a handful of companies. Hong said the Finance Ministry will select the companies, and it “already has several good candidates.”

Thursday, leaders also for the first time publicly announced the physical location of the stock market. It will go in Camko City, in Phnom Penh’s Russei Keo district, Keat Chhon said, noting that the building is in the architectural design process and construction will begin “soon.”

The location, which is owned by a South Korean-Cambodian joint venture, was selected because it will create a “modern” environment that is “surrounded by high-tech to meet the challenges of becoming a modern global operator,” Mey Vann said.

The creation of a Cambodian stock exchange has been under discussion since 1995, and business leaders said Thursday that they were pleased by these most recent steps toward making the exchange a reality.

“Until now, not much has been told to us about the progress, so it has been difficult to assess [the appeal of being listed],” said James Ho, chief financial officer of AZ Group. “It is good to know what are the requirements, the rules, the regulations and other things so we have a choice on whether it is better here, or Korea or Singapore…. I’m not saying we are 100 percent interested. We are just exploring the possibility. Our company is quite diversified. We are a local company so if there is a chance it is beneficial to us, we will list.”

Mark Hanna, chief financial officer of The Royal Group, said he was eager to hear when the securities market would actually launch. “Why is it of interest?” he asked. “A couple of reasons: Cambodia is going through massive economic growth. Capital is difficult to get, particularly at this time. So a stock market offers just another avenue to raise capital and continue the growth of Cambodia.”

Hanna, however, also noted the current economic climate: “It’s not good, but there is enough lead time,” he said. “If the stock market was launching today, IPOs would be difficult. It’s not an IPO market.

“[In] two years time? Once credit starts flowing again, once the world starts going into recovery mode, good time to launch. There will be a lot of interest in Cambodia once money starts looking for new homes…and the stock market offers really good avenues for foreign investors to come in and participate in Cambodian growth.”


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