In an effort to stir confidence into the Kingdom’s sleepy bourse, which has seen two new companies list in the past seven months, the Cambodian Securities Exchange (CSX) held a day-long conference to educate companies about the benefits of listing as an alternative for accessing capital.
Speaking yesterday, Hong Sok Hour, chief executive of the CSX, admitted that while many companies don’t understand how the stock exchange works, it still offers a “highly efficient way to mobilise capital based on Cambodia’s current economy”.
“Companies can’t maximise growth by relying on their own capital or debts from bank [lending],” he said.
Finance Minister Aun Pornmoniroth urged the CSX to provide info about the challenges of the initial public offering (IPO) process so that companies could better prepare to list.
He said that trading has remained lackluster despite the government’s attempts to encourage companies to list by developing a Growth Board that targets small- and mid-sized firms and through issuing prakas that give a tax break for companies up to 50 per cent for three years.
“I hope that this conference will become crucial in making companies active so that they can see the long-term gains, strengthen the reputation and have more trust in the market,” he said.
Sou Socheat, director-general of Securities and Exchange Commission of Cambodia (SECC), explained that while the conference was aimed partially at boosting trading, it should promote the benefits of an IPO as the main selling point.
Phnom Penh SEZ, which became the fourth company to list last Monday, successfully raised $8.2 million in its IPO, while the Phnom Penh Autonomous Port (PPAP) raised $5.2 million last December. Neither company debuted to high levels of trading.
Han Kyung Tae, managing director of Yuanta Securities (Cambodia), the underwriter for PPAP, said that unlike developed stock markets that see high levels of trading and are vulnerable to economic shocks, the Cambodian market should be viewed as an IPO market that provides funding for smaller companies looking to expand.
“One of the frequent questions and concerns that I get is about the low level of market liquidity. But in my observation, low market liquidity doesn’t bother long-term investors or long-term shareholders,” he said. “IPO is all about raising equity money rather than borrowing money.”
Fong Nee Wai, chief financial officer of Phnom Penh SEZ, who compared the Thai stock market to the CSX, countered that until Cambodia builds up its own core of domestic investors, liquidity would continue to remain low.
“When you do not have large numbers of local investors inside the system, of course the foreign investors will not come,” he said.
“I believe liquidity builds liquidity. Ultimately, there has to be more individual investors in the market. Cambodia should use the Philippines stock market as an example, where 50 per cent is local investors and the rest are foreign.”
Taiwanese-owned garment manufacturer TY Fashion (Cambodia) is the only other company that has officially shown interest in listing. However, a date has not been confirmed for the IPO.