Dear Editor,

I was interested to read (“Stock exchange delay feared”, May 21) that Nguon Meng Tech, director of the Cambodia Chamber of Commerce, thinks one reason why the Cambodian bourse may not be opened when planned is that local business people are of “an older generation and may not understand the exchange”.

Might I suggest that many of this older generation of business people, most of whom will have shown patience and shrewdness in establishing thriving and profitable enterprises, may not be aware of the technical details of a bourse, but will have finely tuned antenna as far as risk is concerned.

To reduce financial risk as one gets older is usually taken as being a sensible move. Those who have spent a lifetime weighing up opportunities and, as important, the motives and character of those who offer new ways to make money, are much more likely to keep their wealth in gold or other tangible property.

For those who wish to maintain a reasonable level of liquidity, major Cambodian banks offer interest rates comparable with those in the West, and the tax rates are substantially lower.

A Cambodian bourse might be full to the brim with companies that meet all the criteria of the January prakas, but they would not be immune to the effects of global markets. Between May 3 and May 20, the Dow fell by 10 percent . The price of shares bought as an investment in financially sound companies that had excellent corporate governance and first-class accounting standards collapsed with the rest.

Of course, when the effect of this type of movement on the wealth of individuals is questioned, there is no shortage of financial experts to explain the reasons for a “correction”, advise that the past is no guide to the future and to assert that, in the long term, it is far better to be invest money in equities than in a deposit account.

Might I suggest that those involved with introducing the stock market develop an inexpensive education programme to be delivered all over the country that would honestly present the pros and cons of equity investment.

The negative effects of local corruption and lack of transparency would be looked at, but so too would the effects of international pressure originating through such strategies as naked short-selling.

The impact of new technology could likewise be reviewed, for, far from being in the hands of shouting men with waving arms, 60 percent of trading volume on all markets is, according to a New York-based research firm, now done by pre-programmed computers that can execute a trade in less than a millisecond. It is probable that this method was, at least partially, responsible for the dramatic falls of May 6.

I am sure that such a programme would attract a substantial number of students, who, after considering what they had learned, would be able to make informed choices about where, when and if they would invest in equity markets.

Perhaps the most valuable lesson of such a course would be based on the old Arab saying: “He who says he can predict the future is lying even though what he says may turn out to be true”.

Michael Hansen

Phnom Penh

Send letters to: [email protected] or PO?Box 146, Phnom Penh, Cambodia. The Post reserves the right to edit letters to a shorter length. The views expressed above are solely the author’s and do not reflect any positions taken by The Phnom Penh Post.