Strong start for Cambodian bourse

April 18, 2012
By Sarah Mishkin in Hong Kong
Financial Times

Cambodia launched its first stock exchange on Wednesday amid investor enthusiasm that drove its first listed shares up 47 per cent by the end of the debut session.

Southeast Asia’s smaller markets have been looking to translate their fast economic growth into stronger capital markets that can draw in foreign investors and help the government privatise assets.

Neighbouring Laos launched its stock exchange last year, and Myanmar confirmed last week that the Tokyo Stock Exchange will help it open a securities market.

Since the fall 30 years ago of the Khmer Rouge regime, which killed nearly 2m of its own people and at one point blew up the central bank and abolished private property, Cambodia’s economy has grown steadily on the back of manufacturing, agriculture, and tourism.

“Investors are still looking for a place with top-line growth, and there is that here,” said Scott Lewis, managing partner at Leopard Capital, a Cambodia-based investment group.

Economic growth is expected to be 6.5 per cent in 2012, compared with 6.8 per cent last year, according to the Asian Development Bank. Millions remain in poverty, however, and corruption and difficulty doing business have hindered interest from foreign investors.

The Phnom Penh Water Supply Authority, the first, and so far only, listed company, was floated by the government, which retains 85 per cent of the group.

The launch of the stock exchange had been subject to delays, first by the turmoil of financial crisis and then by the complications of designing the exchange. Ultimately, PPWSA raised about $20m in an offering said to have been 17-times subscribed.

Two more state-owned companies, a telecoms group and a port, are expected to be among those listed this year.

Local banks, insurance companies and garment manufacturers will be the most likely private sector candidates for flotations, said Anthony Galliano, chief executive of Cambodian Investment Management.

The biggest challenge for the exchange will be maintaining trading volumes.

The Laos exchange, which has two stocks, has seen low volumes but investors are optimistic that Cambodia’s will be livelier.

“It is clear that [the Cambodian authorities] are being very thoughtful about the pipeline of IPOs [initial public offerings],” said Jessica Morrison, head of market structures for Deutsche Bank in Hong Kong.

Korea Exchange holds 45 per cent of the exchange and provided Cambodia with the technology and training that helped with the launch. South Korea played a similar role in Laos and it holds 49 per cent of that exchange.

Additional reporting by Song Jung-a in Seoul