Finance Minister Keat Chhon launched the long-awaited Cambodian stock exchange in Phnom Penh yesterday with a call to state-owned entities to put “more effort” into preparations for their initial public offerings.
No companies are yet listed on the Cambodian Securities Exchange, and when the pomp and ceremony of yesterday’s launch ceremony came to a close, the bourse’s dozens of trading screens stood idle.
Investors say that while the launch of the CSX is a symbolic milestone for Cambodia’s financial sector, coming after years of missed deadlines and delays, it could be some time before companies list on the exchange and capital starts flowing into the economy here.
“Today is a historic day for the Cambodian financial sector and is also the new national pride for Cambodia,” said Mr Chhon, addressing a crowd of government officials, investors and securities firms who gathered for the launch at Canadia Tower, the home of the new bourse.
“This clearly shows that Cambodia is moving to a new stage of financial sector development,” the minister said.
Mr Chhon said that trading at the exchange would likely commence by the “end of this year,” as long as the three state-owned companies preparing to list–Telecom Cambodia, the Phnom Penh Water Supply Authority and Sihanoukville Autonomous Port–are in full compliance with market regulations and have finished preparing their initial public offerings, or IPOs.
“I would like to take this opportunity to ask the management and all members of staff of the three state-owned enterprises to put more effort in order to get the public offering done according to schedule,” he said, adding that Phnom Penh Water and Telecom Cambodia, whose public offerings are being prepared by Tong Yang Securities, would be listed by the end of this year.
Mr Chhon also said the bourse would help companies operating in Cambodia improve corporate governance and accountability, both of which he said were “preconditions to attract long-term capital.”
Hong Sok Hour, chief executive of the CSX, said that it was “realistic” that trading of stock in Cambodia’s state-owned companies would begin by the end of the year but that the CSX had not been approached by any other company about a possible listing.
“After the launch I think that the public will be aware of our existence,” he said. “It’s difficult to make a realistic prediction.”
It is still unknown exactly when Cambodia will see private companies list on its bourse. Investors say it could take some time.
“Locals will obviously want to buy and participate, but I mean they’ve been talking about it for a long time. It’s what, five years behind schedule, and they still can’t seem to get it right,” said Terence Mahony, chairman of VinaCapital, a $1.8 billion investment fund based in Vietnam. “Fine, it may open today, but when will be the first listing?” he asked.
Mr Mahony said that before investors from abroad arrive to put money into the stock market, Cambodia needs to develop more complex financial instruments such as mutual funds, that allow investors to place their money into more diverse portfolios.
While VinaCapital is interested in investing in Cambodia, Mr Mahony said that Thailand, Vietnam, and Laos are, for the moment, more attractive than Cambodia.
There is also more work to be done to make Cambodia a lower-risk destination for investors, experts said.
“In order to attract international investors we need to change the credit rating system,” said Larry Ng Shuen Fai, chief executive officer at Cana Securities, which is owned by Canadia Bank. “The credit rating for Cambodia as a country as a whole is not very attractive, so a lot of fund managers and bond managers think not to come. Even if they are interested, they cannot come because of the high risk associated.”
Cana Securities had been approached by a Cambodian construction company about the possibility of listing on the bourse, said Mr Shuen Fai. He declined to identify the firm citing client confidentiality.
Among the crowd at yesterday’s launch were representatives of a number of local and international companies, including Taiwan-based Roo Hsing Garment Co, which has a factory in Cambodia; Blackstone Group, the global asset manager headquartered in New York; Lucky Group, which owns the Cambodian supermarket chain of the same name; and First Cambodia, an information technology company.
While trading will not start before the end of the year, the CSX should help smaller companies here raise more capital from selling shares. Smaller firms in Cambodia find it difficult to acquire loans due to a high-risk environment and interest rates that can be crippling.