Cambodia Delays Stock Exchange Yet Again

JULY 21, 2010
Associated Press

PHNOM PENH, Cambodia—Cambodia has delayed the opening of its proposed stock market for a second time, pushing the date back to July 2011.

In a statement Wednesday, the Finance Ministry said the delay was due to technical issues and the global economic crisis.

``The postponement of the stock market is to adapt to the evolving situation of the global economic and financial situation, which shows some positive signs of recovery but is still fragile,'' the statement said.

Last December, officials said Cambodia's stock market would open by the end of this year after initially targeting it to begin operating in 2009. After receiving the approval from Prime Minister Hun Sen, the Cambodia stock exchange is expected to kick off in July 2011, the statement said.

The Cambodian economy is small and reliant on textiles, which account for nearly 80% of exports, and hundreds of millions of dollars in international aid. Foreign investment has been deterred by the country's reputation for endemic corruption.

Neighboring Vietnam started its stock market in July 2000. Nearby Laos also is planning a stock exchange.

Hong Sok Hour, director general of the Cambodia Securities Exchange, said the delay was necessary because Cambodia needs everything to be in place before the opening.

``We want our bourse to be a good one when we open. That is why we need the infrastructure and human resources to be ready at the same time,'' he said.

In December, Cambodia awarded a contract to a South Korean firm, World City Co. Ltd., to build the $6 million, four-story, 71,900-square foot stock market building in Phnom Penh's planned financial district on the outskirts of the capital.

The finance minister announced plans in 2007 to launch a stock market, saying Cambodia needs to find new ways to attract international capital beyond international aid and bank loans. Soon after, lawmakers approved a securities law on issuance and trading of nongovernment securities to pave the way for the market.

Construction of Cambodian bourse to begin in Dec

By Ek Madra

PHNOM PENH, Oct 31 (Reuters) - Cambodia expects to begin construction in December on its first stock exchange, a government official said, giving momentum to a long-delayed joint venture with South Korean investors.

'We expect to have the ground-breaking ceremony in December,' Mey Vann, director of the financial industry department at Cambodia's Ministry of Economy and Finance, told Reuters.

The idea of a Cambodian stockmarket has been floated since the 1990s but has struggled for traction in a country known for chronic poverty and a history of upheaval, including the Khmer Rouge 'Killing Fields'.

Cambodian authorities have partnered with private South Korean developer World City Co Ltd to build a $6 million, four-storey stock exchange on the waterfront of a new financial district, Cambodian and World City officials have said.

The area where the stock exchange will be built is flooded swampland on the edge of Boeung Kak Lake in the heart of the Phnom Penh. The end of the rainy season this month will clear the way for workers to begin building the exchange on the corner of what developers are calling Phnom Penh Boulevard.

'The site is under a flood these days. We are pumping the water from the site,' said Vann, adding he expected construction to take between eight months and one year.

The bourse was supposed to open in September, a target set last year when South Korea's stock exchange operator agreed with the Cambodian government to set up and run a joint stock exchange.

But the global financial crisis intervened, ending an unprecedented boom which saw Cambodia's economy expand 10 percent annually in the five years up to 2008. Foreign investment collapsed, tourist arrivals fell by double digits and garment exports, a mainstay of the economy, shrank by 15 percent.

Cambodian officials rejected an initial design, saying the exchange's exterior was too modern and not Cambodian enough. It has since been redesigned using traditional Khmer accents.

'We are still working on finalising the design of the exchange building,' said Vann. 'We'd like to have a mixed design which shows both the culture of Cambodia and Korea.'

Korea Exchange, Asia's fourth-largest bourse operator, will own 49 percent of the exchange and is recruiting and training workers for it. Cambodian will own the rest.

Cambodian officials have cautioned against moving too fast, in some cases questioning whether a country whose education system was decimated during Pol Pot's 1975-79 reign of terror is ready to invest in stocks.

'We are going to launch a public awareness campaign about our stock market next month,' said Vann.

The exchange expects to start small with just four or five companies issuing about $10 million worth of shares each, Intyo Lee, project director for Korea Exchange, said in early October.

That's comparable to neighbouring Vietnam's first stock market launched in 2000 with its initial market capitalisation of $43 million. Today, Vietnam's market is worth $27 billion.

(Writing by Jason Szep, Editing by Dean Yates)

Korean Securities Firm Ready for Bourse

By Ros Sothea, VOA Khmer
Origial report from Phnom Penh
23 June 2009

Tong Yang Securities is the only company that has so far opened for business in anticipation of a stock exchange that officials hope to have up and running by the end of the year.

“We came to Cambodia with a long-term perspective,” the company’s chief representative, Han Kyung Tae, told VOA Khmer. “We are ready to start our business.”

Tong Yang, a financial service provider in South Korea that set up here in 2006, hopes to offer security brokerage, stock deposits, subscription and sale of securities, merger and acquisition brokerage, bond issuance and discretionary investments.

“We are right now working with a couple of state-owned companies and a couple of private companies who might be listed on the stock exchange,” Han said.

Cambodia has said it will have its exchange up and running in December 2009, despite the global downturn and with the aid of South Korea.

Han said his company had been waiting for an official license to extend its business roles, such as broker and dealer, and to establish a private equity fund.

In South Korea, Tong Yang charges from 3 percent to 5 percent of the capital it earns trading bonds or shares. Han said he was not sure what commission the company will take in Cambodia.

Stock trading partly depends on security firms or investment banks. It also requires economic stability, a system of laws and strong companies listed on the exchange.

Vietnam’s stock exchange was established with only a few companies, Han said. But a decade later, more than 400 companies were listed. After 20 years, China’s stock market lists 4,000 companies.

In Cambodia, meanwhile, securities experts have estimated around 40 companies will be listed, while their earning potential remains to be seen.

“It depends on competition, the size of business,” Han said. “If competition becomes tougher in the investment banking business in Cambodia, which has a small size of economy, we will face difficulties in pursuing profit.”

Han also warned that if smaller securities firms are approved, the bigger ones will not enter Cambodia’s market.

Sam Ganty, a member of the government’s Securities and Exchange Commission, has said that bigger investment banks have more influence than smaller ones.

They might be stronger, have more experts, and a network of potential investors, he recently told VOA Khmer.

SEC President Minh Ban Kosal said that so far 10 securities firms are waiting to apply for business licenses.

The commission will carefully select the firms with minimum capital fit to its national economy, he said, adding that firms will be able to apply for licenses starting in August.

Cambodia to Open Bourse in 2009; Urges Corporate Transparency

By Netty Ismail and Yoolim Lee

July 24 (Bloomberg) -- Cambodia plans to open its first stock exchange and start a corporate bond market in the fourth quarter of 2009 in a bid to attract foreign funds to Southeast Asia's second-poorest nation, a government official said.

Six to 10 companies, with a combined market value of $200 million to $400 million, including Sokimex Group, the country's biggest petroleum company, and Acleda Bank Plc, its largest bank, will likely be listed on the exchange within a year of it being set up, Kao Thach, head of the Ministry of Economy and Finance's financial market division, said late yesterday.

Cambodia, which abolished money under the Khmer Rouge three decades ago, is seeking to lure foreign funds as economic growth slows after peaking at 13.5 percent in 2005. The government will need to improve the legal system and urge Cambodian companies to open their accounting records to investor scrutiny, said Agost Benard, who covers the country for Standard & Poor's.

``Given all the uncertainties and lack of transparency, at least initially, it will probably be the local people who are willing to take the punt,'' said Benard, associate director at the rating company in Singapore. ``International investors who expect higher standards of disclosure and transparency will take a wait-and-see attitude.''

The government last year asked more than 400 companies, most of which are family businesses, to get their financial statements audited to improve transparency, Thach, 34, said in an interview in Phnom Penh.

Local Rules

``Cambodia has been effectively cut off from the rest of the developed world for the past three decades, so a lot of business has been done based on unwritten local rules,'' said Marvin Yeo, co-founder of Frontier Investment & Development Partners in Phnom Penh.

Frontier Investment, a private-equity fund, is raising $250 million to put in the second-poorest of 10 Southeast Asian nations, and will cash out of some of its planned investments through listings on the exchange, Yeo said.

The listing requirements in Cambodia will likely be modeled on the Kosdaq, South Korea's second stock market that was set up 12 years ago for small- and medium-sized firms as well as venture start-ups, Thach said.

Companies seeking a Kosdaq listing need to be in business for at least three years with minimum paid-in capital of 500 million won ($495,417) and debt-to-equity ratio of less than 150 percent of the industry mean. Venture capital firms have less stringent requirements under the South Korean government's program to prop up smaller technology companies.

Raising Capital

South Korea's exchange is helping Cambodia set up its bourse. The Cambodian government, which will likely own at least 51 percent of the planned venture, and the operator of the Seoul-based bourse, Korea Exchange Inc., will begin discussions next month to decide on their shareholdings, Thach said.

The Cambodia Securities and Exchange Commission will likely be set up as early as September, Thach said.

``They're nowhere near getting the rules together, the criteria for listing, transparency, proper accounting,'' said John Brinsden, vice chairman of Acleda Bank, the largest Cambodian bank with 209 branches in 24 provinces.

Acleda Bank will ``need a lot of capital over the next few years'' as it opens more offices in Cambodia and neighboring countries including Laos, Brinsden said in Phnom Penh.

Sokimex, which has monopoly rights to ticket sales at the Angkor Wat ancient temple ruins in Siem Reap, plans to expand its hotel and resorts business, Chief Executive Officer Sok Kong said on the company's Web site.

Transparency Concerns

Other Cambodian companies considering initial public offerings include Canadia Bank Plc, Union Commercial Bank Plc and Mong Rithy Group, which has palm oil plantations in Sihanoukville, Thach said.

Royal Group, which owns the country's biggest mobile-phone operator and has a partnership with Australia & New Zealand Banking Group Ltd. in Cambodia, will consider a listing ``in the future,'' Chairman Kith Meng said in an interview in Phnom Penh.

Companies can sell shares or bonds in Cambodia's currency, the riel, or the dollar, which will mitigate any foreign exchange risk for international investors, Thach said.

Still, ``the biggest concern would be the credibility of the companies or their reporting standards,'' said Frontier Investment's Yeo. Transparency International, a private monitoring agency based in Berlin, ranked Cambodia 162nd of 179 countries in its annual report on perceptions of corruption last year.

To contact the reporter on this story: Netty Ismail in Singapore
nismail3@bloomberg.net.