By: Ben Bland, The Asia File
The Telegraph (UK)
Capital markets can be vital tools of development, helping the better companies in poorer countries to get access to the money they need to grow, creating wealth and employment in the process.
However, given the fragile nature of stock markets, it is important that countries don't run before they can walk. Which is why Cambodia's decision to press ahead with the launch of its own stock exchange next year is slightly concerning.
After all, this is a country where business and personal disputes are still routinely settled with a late night shoot-out in the capital, Phnom Penh. Is Cambodia really ready for the wild fluctuations, the speculators and the scams that typically dominate new equity markets in developing economies?
Whatever you think, you have to commend the Cambodian government's resilience in sticking to its plans for a 2009 launch, despite the ongoing global turbulence.
Hang Chuon Naron, secretary general of Cambodia's Ministry of Economy and Finance, told the Phnom Penh Post that he hopes a stock market will provide a more long-term source of finance than the foreign aid (around $600m annually) that the country is currently reliant upon.
"We hope the stock exchange will provide longer-term finance compared to what we have relied on in the past, such as banks, national budgets, foreign aid and foreign investment," he said. "I think in five or ten years, the stock exchange will play a key role in strengthening Cambodia's financial sector, but we must proceed carefully to build trust from our people and investors."
But while he's right about the long-term benefits of a stock market as a cheap place to raise capital, the problem across the developing markets of Southeast Asia is the pre-dominance of short-term speculators, chancers and crooks.
This article in today's Bangkok Post sums up the dodgy share trading scene over the disputed border in Thailand rather nicely.
"On any given day, investor cliques can join hands, even sometimes with company management and major shareholders, to push share prices one way or the other," the article notes. "For these investors, fundamentals are meaningless - indeed, the larger and more prominent the company, the less attractive it is for speculators, due to the greater difficulty in manipulating prices for large-cap stocks." While Southeast Asia's comparatively inexperienced and poorly funded regulators do their best to get on top of these types of market abuse, they are generally fighting a losing battle against the better-funded and more powerful crooks.
But trading scams on illiquid markets are not just the preserve of Asia. When I covered London's Aim market for The Telegraph, I would get a complaint at least once a week from an investor concerned about alleged insider trading or ramping/deramping. And, on more than one occasion, I shared lunch or a drink with small-cap executives and brokers who showed a well-hardened disdain for market rules and minority shareholders.
However, given the fragile nature of stock markets, it is important that countries don't run before they can walk. Which is why Cambodia's decision to press ahead with the launch of its own stock exchange next year is slightly concerning.
After all, this is a country where business and personal disputes are still routinely settled with a late night shoot-out in the capital, Phnom Penh. Is Cambodia really ready for the wild fluctuations, the speculators and the scams that typically dominate new equity markets in developing economies?
Whatever you think, you have to commend the Cambodian government's resilience in sticking to its plans for a 2009 launch, despite the ongoing global turbulence.
Hang Chuon Naron, secretary general of Cambodia's Ministry of Economy and Finance, told the Phnom Penh Post that he hopes a stock market will provide a more long-term source of finance than the foreign aid (around $600m annually) that the country is currently reliant upon.
"We hope the stock exchange will provide longer-term finance compared to what we have relied on in the past, such as banks, national budgets, foreign aid and foreign investment," he said. "I think in five or ten years, the stock exchange will play a key role in strengthening Cambodia's financial sector, but we must proceed carefully to build trust from our people and investors."
But while he's right about the long-term benefits of a stock market as a cheap place to raise capital, the problem across the developing markets of Southeast Asia is the pre-dominance of short-term speculators, chancers and crooks.
This article in today's Bangkok Post sums up the dodgy share trading scene over the disputed border in Thailand rather nicely.
"On any given day, investor cliques can join hands, even sometimes with company management and major shareholders, to push share prices one way or the other," the article notes. "For these investors, fundamentals are meaningless - indeed, the larger and more prominent the company, the less attractive it is for speculators, due to the greater difficulty in manipulating prices for large-cap stocks." While Southeast Asia's comparatively inexperienced and poorly funded regulators do their best to get on top of these types of market abuse, they are generally fighting a losing battle against the better-funded and more powerful crooks.
But trading scams on illiquid markets are not just the preserve of Asia. When I covered London's Aim market for The Telegraph, I would get a complaint at least once a week from an investor concerned about alleged insider trading or ramping/deramping. And, on more than one occasion, I shared lunch or a drink with small-cap executives and brokers who showed a well-hardened disdain for market rules and minority shareholders.
37 comments:
It is difficult to project that it is beneficial or not in this point of time. Because even sometime, first failure can also result in an improvement for the next jump.
However, given that the small population of our country, and the vast majority of the populations are in rural areas whereby financial education are heardly to be seen. Many people are still living in very primitive way but happy without having this 'modern trade'.
Sometime keep it simple will be happier than make it complicated.
stock market? Where is the auditor who is reputable enough to certify the financial statements? Who regulate the auditor and who guarantee the competence of auditors? This just raises some question regarding auditing.
I think the share market in Cambodia will not be popular, because of the mistrust of the people on the government, and who does not when the basics of share market, such as auditing, is not legislated for.
I did a bit of research, and the Big 4 Audit firm such as Deloitte, PwC, EY and KPMG has presence in Thailand and VN, but not in Cambodia. See if they open their business there.
3.54 that is not correct.
Both KPMG and PriceWaterhouseCoopers are operating in Cambodia and have been for quite some time I believe.
Check the Yellow Pages for more information.
3:54PM, which jungle are you from? PWC and KPMG have always been in Cambodia for years.. EY also came to Cambodia before but was bought over by PWC (Cambodia) sometime ago.. I heard they (EY) now want to come back.. There are also some smaller audit firms around. The auditors and accountants will be regulated by the KICPAA.
I don't know what kind of research you've done.. but that perhaps explains why there have been only bad news about Cambodia in world media.
Let's get the government's transparency and accountability for a few more notches before EVER think about open the stock market, because the country simply is not girded for the reality.
"But while he's right about the long-term benefits of a stock market as a cheap place to raise capital,.."
This statement is incorrect! the cost of raising funds through equity market is the most expensive way of financing.. but it gives the company a long term source of capital.
the author should go and learn some basic financial management knowledge before commenting something like this.. why everyone like to act like a pro while they are not? [sigh]
Kon Khmer PP
I wonder what these big 4 are doing in Cambodia? How big is their business over there (i.e. staff number, clients number, busyness, etc)? A friend said they are just small firm there with a couple of employees, can anyone confirm this, as I don't believe it, seeing how big they are in the international stage.
Who is your friend? a couple of employees meaning? 3 to 4?
They have well above 100 employees and hundreds of clients providing auditing and some other consulting services there.. Of course they can't be retaining thousands of employees while they only have a few hundreds clients.. A simple common sense can explain this.
I suggest u fly to Cambodia to see what is happening over there first hand.. and please don't shout LOUD LOUD from your jungle for the shit you ASSUME. Get real, pleaseeeee.
5:12, thanks for the info, though you could do so in a polite way since I was asking for confirmation about info I don't have firsthand knowledge.
That's great to hear. But are the employees Khmer or foreigners (I mean the one that does the actual consulting or auditing work, not administration or driver or anything like that)?
Also, I wonder who are they auditing since there is no stock market yet in Cambodia?
Again, yes I will go to PP, but if you want to answer, pls do so politely as I am genuinely curious about this.
5:18pm, I would answer you in a more polite way if you didn't sound like insulting Cambodia in the first place.. (i assume you too are Khmer)
For your info, at least 90% of the employees working in those audit firms are Cambodian ranging from drivers to office administrators (of course) to audit assistants, audit seniors, managers, senior managers, and even directors (i guess, but I'm not sure about audit partners). I think Cambodia will soon have its own Cambodian audit partners once the legislation on accounting and auditing is passed.. and yes, in terms of quality, those Cambodian top management are ready to take over the role. They are internationally qualified (ACCA, CPA.. they have it.. please don't look down on them as they are better than some foreigners i've seen, technically at least)
Why is auditing has only to do with the stock market? many NGOs need their accounts to be audited and then submitted to its donors/sponsors.. banks need to submit their audited accounts to the National Bank.. those subsidiaries with its HO oversea need to submit their audited accounts to their HO for consolidation.. and soon once the said legislation is passed, most companies will need their accounts to be audited..
I will answer all your questions in a polite way if you put your question in the same manner.
Good for you, see you in PP.
Kok Khmer PP
5:53, thanks a lot for your info, and if my comment appears unfriendly, I didn't mean it. Yes I am Khmer although I have not been there for about 8 years now.
Oh, that's interesting. You did not mention Deloitte Touche Tohmatsu, I assume it is not present there? Seeing that it is also a big 4, I assume it would be there to compete with PwC.
Also, do people (those who do not come into contact with auditors) generally understand what auditing is about? Again, not being rude, but I am curious as to what people think of auditors given the rampant corruption of those in authority over there, and seeing that auditor is in that position of some sort.
I think you work for one of them, yeah? Good on you. Good to see Khmer climbing the corporate ladder. I am sure you have been seconded to some foreign countries as member of your firm (to NY or London maybe).
May I ask if the majority of Khmer worker is Khmer citizen or Khmer with foreign citizenship? My friend provides me with all sort of lies, which makes him look like a fool after all. He works for the Canadian embassy. Now I trust you more to be honest.
6:56PM, no worry, you are my brother.
You are right Deloitte is not there yet. PWC and KPMG are the two dominating audit firms there for now.
Yes they do, bro. Most of them are in private firms or NGOs. They are not [much] affected by the corruption culture in the Govt authorities (i have to be honest here, although i've always tried to protect the Cambodia's image all the while). In fact, auditors (external, in this context) are not there to detect fraud or corruption which are normally hidden far below the ground.. Their role is there to express their opinion as to whether the financial statements are "true and fair" and hence detailed investigation into fraud or corruption is outside of their scope. Their works are based on "materiality", "sampling", and on documentation.
Hmm in fact i used to work in audit firm for just a year or two.. then i jumped to commercial, then corporate finance.. i traveled to some Asian countries such as hong kong, singapore and malaysia.. and i virtually carry Cambodian flag everywhere i go..
Yes you can trust me bro. You will see the facts yourself when you are in Cambodia. Cambodia is on its way bro.. Just give her some time, of course.
Best,
Kon Khmer PP
6:56PM, on your last question, yes those are Cambodian nationals educated in Cambodia (including myself). KKPP
Right now it's not the time to deploy a stock market.
the "right time" will never exist if you don't start it somewhere.
Opening a stock market when you have global recession that not very bright.
The right time is after the recession. Unless Cambodia has money to burn.
Also you have to check if your product can compete against the rest of the world. You don't open a stock market for prestige. If your market is strong enough you will be at the mercy of the bigger country like the US. They can play yo-yo with your economy. That is when you throw your money through the window.
9:48 PM
Agree.
Right now Cambodia is better of without a stock market and a national flag carrier.
I am in favor of the stock market for Cambodia. Almost all countries of the world have a capitol market even Iraq, and Palestine and Vietnam. The issue will be that the Securities Exchange Commission of Cambodia will have to be formed and it should be independent sort of like the National Bank is. It is an important way that Cambodian companies to be able to raise money for expansion.
we don't open stock market for fun, prestige or whatever. we open stock market to provide more options for the local businesses and entrepreneurs to raise funds for their business expansion and hence fuel economic growth.
9:48PM, sorry i don't quite understand your comments.
"If your market is strong enough you will be at the mercy of the bigger country like the US" what does this mean? and what is "yo yo" play? I'm real curious, sorry.
I think Cambodia should have stock exchange to help stimulate investment in the private sector. And I also think Cambodia should spend more time preparing itself for the strong and reliable opening of the stock exchange while the world economy is in trouble. It is timing stupid...
8:34, Kon Khmer
Oh, that's great to hear. I just had my eyes open about reality. Great to know you are such a helpful person. I've seen your posts around here before.
I'm interested to know you better, any time to chat? My Yahoo Messenger is sotheara2000.
Just remember me as Sotheara. I'll see you around here if not in Yahoo.
Regards.
i think we've got to start somewhere somehow. can't be pessimistic all the time. even a good driver must learn how to drive in the beginning. this is how i see cambodia's integration into the world's stage as well. got to start somewhere somehow,no matter what. we all learn by making mistake. that's how the world had developed better thing for the human race, by trials and errors. god bless cambodia.
1:43 AM
I'm not a stock trader. Stock market is about speculation. The more money you have the more control you have on that market, every time the big shots sell or buy something in mass that create wave on the market, that the smaller country have to cope with. This create panic on the market. Let say if one of the G7 doesn't like Cambodia they can through the stock market put the country in debt and devaluate the currency. The country we contract more debt, meaning the country is ranked lower by Standard and Poor's, the investor is leaving the country (they are opportunist),
unemployment is on the rise, inflation etc. Big headache.
Like in 1997 the Thai bath devaluate from from 26 baths to 52 baths for one dollars US (big headache for the government), this because some Thai leaders became Anti-American. Can they prove anything, no.
Another example Pakistan they have friction with the US and now the economic is taking a big heat. You can argue that it's global recession.
For the national carrier, the Swiss doesn't have a flag carrier anymore, bought by Luftansa.
I'm not against stock market or flag carrier, go when you're ready (with knowledgeable people) don't rush.
Here come the criticism.
1:43AM, sorry but i still don't see a logic in your comments.. anyhow, thanks for your efforts.
i mean "8:20AM, sorry but i still don't see a logic in your comments.. anyhow, thanks for your efforts."
oh fuck you dumb ass 11:33. You are as dumb as a dog.
OK you smart ass 12:12pm, explain this: "Let say if one of the G7 doesn't like Cambodia they can through the stock market put the country in debt.." where on earth there is such thing? how can they force a country into debt? and through the stock market? don't bullshit here.. the government is not listed in the stock exchange.. some companies do. they can buy shares of those companies but not the government's.
1:47 PM
Companies are enlisted on the stock market, but its the big shots that speculate on the shares of these companies through traders. When speculation get out of hand or a couple of big shots decide to make waves, these company go bankrupt. When the companies close their doors people lose job. When people lose jobs it become a major headache for the government. When unemployment is up people spend less,..., that call recession. The government cannot say it's not my fault.
That why in the US, the government has to intervene, if they don't the financial system will crumble.
7:26AM, don't pretend to be smart ass.. your imaginary thinking does not happen in real world.. I can't think of a scenario where speculation in the market may cause a company to go bankrupt.. worst case, say, when a company's shares go down below a reasonable level (because of specualation, whatever..), a company may decide to buy back all its shares from the market and delist from the stock exchange -- just stay private..
Those big-shot companies in the US that went bankrupt.. don't bullshit here please. it's not because of speculation or whatsoever in the stock market. it's driven by the company's performance itself.. like those banks/financial institution.. the cause of their failure was because they invested so much in the so-called sub prime loan/ home loans.. etc which have turned bad and hence have caused liquidity problem to those financial institutions.. was that because of speculation in the stock market? hell, no. But, speculation in the real estates sector may have contributed to this crisis..
The regulatory system also play an important role.. The US have been so proud for its capitalism, "the FREE market" and hence have been reluctant in regulating its industries. This opens door for those greedy financial institution to do what they want and.. at then end they suffer a big blow when things do not go their way. Should the govt have well regulated them, can they go this far?, No!
And you think you are the smartest people in the world? please...
a humble person is not a dumb.
and 7:26AM, can you give example of this? "When speculation get out of hand or a couple of big shots decide to make waves, these company go bankrupt..." make waves? like what?
Don't just copy and paste the text from the newspaper and say you are the smartest person in the world..
Here an example.
http://en.wikipedia.org/wiki/Rothschild_family
If you still don't understand, just keep on living your happy life in your happy world.
10:17PM, i'm not asking for that stupid link..
You should have just said you don't understand what you were writing, and that would be better on you.
what a hypocrite.
oh fuck you dumb ass 10:42 PM. You are as dumb as a dog.
10:42 PM
Here something at your level of intelligence.
http://www.phnompenhpost.com/index.php/2008102322289/National-news/10000-pornographic-videos-seized.html
i know u r damn good at "copy and paste" and branding people as dumb for you can't accept your own stupidity. go ask your mum to "re-create" you... oh and for that, go bang your head first or just blow it up whatever way u like.
hopefully, you will be re-born a better and smarter person.. unless, your mum's gene is so fucked up.
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