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Transparency the key ingredient for CSX success

The main hurdles facing Cambodia’s planned stock exchange are transparency and accountability, according to experts.

Markets in emerging countries generally face higher risk, but Cambodia is putting the regulations in place to address these concerns, bourse officials said.

The market has the potential to provide more source of capital, but investors require a certain degree of openness, wrote Olaf Unterroberdoerster, senior economist at the International Monetary Fund
“What is perhaps more important is that associated risks to overall financial system stability are appropriately managed and that the stock market offers fair, accountable, and transparent access to investors,” he said.

“Without this, investors may stay away, the market will not develop, and its benefits for Cambodia’s long-term growth by enabling a better allocation of savings and investment will remain limited.”

The Cambodia Securities Exchange is set to launch July 11, though the three state-owned firms slated to list say they will not be ready to trade until later in 2011. Exchange officials say they have worked hard to ensure the proper mechanisms are in place to guarantee transparency and accountability for investors.

“We are a new market. We will face such risks.” said Securities and Exchange Commission of Cambodia Deputy Director General Huot Pum.

But he added that the regulator had taken care to mitigate concerns of transparency.  

“I don’t expect we can manage [risk] 100 percent, but we have to find a suitable mechanism to deal with it or it will cause trouble,” he said.

“Our regulations are much stricter than many other countries in the region, as we took some guidelines not from developing countries but developed countries to apply here.”

The government was focused on preventing potential market manipulation on the Kingdom’s upcoming bourse, he said.

“What is our main concern is the market manipulator. They are investors who can impact the price of stock got fluctuated. So, our regulations keeps eyes on them,” saying that if the mistakes were found, they will face legal action.

Business Research Institute for Cambodia Economist Suzuki Hiroshi said there were always risks for investing via exchanges, including country risk, political risk, currency risk, and insufficient information.

“If they could get much more accurate and immediate economic information, the country risk will be lowered,” he said.

“I would say Cambodian market will be ‘High Risk, High Return’. Without taking the risk, you can not get a good return.”

ANZ Royal Bank CEO Stephen Higgins said he agreed exchanges in emerging markets generally face a higher degree of risk.

“Any investment decision involves categories of risk and emerging market stock exchange will carry more risk than other forms of investment,” he said.

“In that context, [investing] in the Cambodian Stock exchange might not be different in term of risk like you’re investing in the Vietnam stock exchange.”

Stephen Higgins said the financial system was rapidly progressing, though further action ought to be taken.

“It is improving massively but there is still some work to go. It is a natural evolution and it will take time. It will not happen overnight.”

In Channy, CEO and President of Acleda Bank, said he agreed that financial regulations in Cambodia had progressed well.

“If we compare [our regulations] to neighbouring countries, our are very good, with sound transparency.”

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