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Taking stock: Cambodia's exchange

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The government has said Cambodia’s first stock exchange will launch next July “at any cost”. As the country readies itself for the much-delayed bourse Inpyo Lee, project director of Korean Exchange, which holds a 45 percent stake in the Cambodian Securities Exchange, holds an interview with Nguon Sovan.

Why did the Korean Exchange decide to enter into a joint-venture with the Kingdom for the Cambodia Stock Exchange?

The exchange is a strategically important piece of infrastructure from a national economic perspective. As an extreme example, the Cambodian government may want to exert its capital market policy through exchange operations. KRX also had reasons for entering in a joint venture with Cambodia. There is a global trend for stock exchange businesses to reach out abroad. We saw great potential for growth in Cambodia.

What work has been done so far to prepare for the bourse?

Over the years, KRX has supported the establishment of the CSX. We’ve provided Cambodia’s potential market participants with training and held seminars many times. We have pursued measures to improve their capacity building for the capital market. KRX has also been dispatching staff to expedite the processes required to set up the CSX, as well as assisting the development of Cambodia’s regulatory framework. We have supported the creation of a comprehensive financial legal system, for the protection of investors, by Securities and Exchange Commission of Cambodia and have finished most of the legal rules for CSX. Securities companies and settlement banks are currently waiting to be approved.

What still needs to be done for CSX to launch in July?

Our project is now running to the finish line. We have almost completed our information technology system development and are now in the final stage of testing.
We are about to ship all the IT equipment and materials from Korea to Cambodia.
In the meantime, the first CSX board members meeting will be held soon. Then we will decide when we will apply to SECC to get a licence for CSX.
However, we need to develop more macrostructure - such as a balanced banking and financial sector, and an advanced accounting system.
Moreover, potential companies for listing must be carefully examined. Another major issue is the education of potential investors, but CSX is preparing for that.

Some experts say it will take another five years for the stock market to hit “full swing”. Do you think the bourse can be launched on time?

My answer will be different depending on how you define “full swing”.
The securities market scheduled to be established next year will have only basic features and not the same [features] as ones in advanced countries.
Judging at this time, I believe the schedule is feasible. However, we will need support and enthusiasm for the project from the Cambodian government, financial industry, companies and the Kingdom’s people, in addition to the efforts made by KRX.

What are the advantages of the stock exchange to the economy and Cambodian people?

The potential benefits of a stock market are that Cambodia can acquire support for its dynamic growth and facilitate the development of its financial markets.
A stock market allows allocation of capital based on market mechanisms. It invigorates the flow of foreign capital because it facilitates investment and its existence will be in synergy with the current existing financial system.
The securities market, which will be embedded in the CSX, will also give the Royal Government of Cambodia an efficient revenue source so that it can attend to the pressing social issues of infrastructure and poverty.

In the future, if I had money and wanted to invest in the bourse, how could I do this? How could I trust that my money would not be embezzled?

First of all, I want to clarify that you don’t invest in the CSX. You may buy and sell securities through brokers. Then, CSX will guarantee the transfer and clearing services for investors. Moreover, there are a lot of legal frameworks and systems to protect honest investors.
What have you observed about companies in Cambodia in terms of adherence to accounting standards, management systems and transparency? Are they qualified enough for listing?
For many companies, I think there is a long way to go to meet CSX requirements.
However, there are good, qualified companies that can be listed in the CSX next year – some companies already practise international
standards. If many firms see the advantages of being listed on the exchange, then they will automatically follow the system.

How many companies do you expect will list at its launch?

As you know already, three state-owned enterprises are preparing with the Cambodian government to list in the first year.
If these SOEs launch successfully next year, then I expect many companies will come to the exchange.
The decision of whether Cambodian riels or US dollars would be used in the upcoming stock market has not yet been made. In your opinion, which one is the most appropriate option and why?That depends on the government’s decision and we have prepared for the options of using both riel and US dollars.
For my personal view, in the event that stocks are issued in US dollars in its first stage, the relative merits of the stock market will be highlighted as the currency risks involved in riel would be removed. But as the riel economy matures, the exchange can begin to also issue KMR denominated securities.

What is the Cambodian perception of the CSX?
In the past three years, Cambodian’s perception towards the CSX has changed, for the better. Cambodian’s perceive CSX in a brighter light.

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