Many of us have heard about the securities market, but not everyone understands its role and how it functions. Around the world, the securities market – also known as the stock market – plays an important role in boosting economies through the facilitation of funds. According to the World Bank, in the US alone the stock market has reached more than $30 trillion in value, not including other financial assets within the securities market such as bonds and derivatives. As significant as this is, there are still a lot of misconceptions regarding securities, especially in a developing country like Cambodia.

What is the securities market?

The securities market is a market where securities like stocks and bonds are bought and sold. The securities market plays a vital role in a country’s economy by allowing corporations, state-owned enterprises and the government to raise funds directly from the public to finance business expansion or infrastructure development. When money flows efficiently from those who have it to those who need it, the economic activities of production and trade prosper, leading to the generation of jobs and wealth for the nation.

What products are available in the securities market?

Securities can be divided into two main categories: equity and debt. The two securities make up the basic forms of:

Stock is a type of equity security that represents ownership in a corporation and a claim on part of the company’s assets and earnings depending on the proportion of shares a person holds. For example, if you own a stock of company A, you are a partial owner of the company. When the company makes a profit, you are entitled to receive that profit in the form of a dividend.

Bond is a type of debt security that represents an amount of money that an investor lends to an issuer, which may be corporations, such as insurance companies, state-owned enterprises or the government. The investor will receive an amount of interest from the issuer periodically and the whole principal back at maturity.

Primary market versus secondary market.

If we take a step further, the securities market can be divided into two – the primary market and the secondary market. The primary market is where securities are bought and sold for the first time. To put it in simple terms, when corporations want to raise funds from the public, they issue securities such as stocks and bonds and sell them to the public. This allows the public to buy directly from the company. This is called the primary market. The investors who buy securities from the primary market can then sell them in the secondary market. This is where existing securities are traded between investors.

Who are the main players in the market?

The Securities and Exchange Commission of Cambodia (SECC) is the government body that regulates the securities sector in the Kingdom. The SECC develops regulations and overlooks all practices within the securities sector to ensure fairness and confidence in the market.

The Cambodia Securities Exchange (CSX) is the sole operator of the securities exchange in the Kingdom. The CSX is where securities like stocks and bonds are traded in Cambodia. The CSX is also an approved operator of the Depository and Clearing and Settlement Facility, meaning the CSX is where securities are stored, cleared and settled.

Securities companies hold different licences. One of their roles is to act as a brokerage, which is to assist investors in purchasing shares on the CSX. Investors who wish to trade in the securities market need to have an account with a licensed broker.

Listed companies are corporations that have listed their securities on the Cambodia Securities Exchange. Listed companies raise funds from the public through the issuance of securities.

What is Post Securities –Basic Market Guide?

Post Securities – Basic Market Guide is a series of educational articles focusing on fostering a greater understanding of how the securities market in Cambodia works. With the content run as a series, investors will accumulate knowledge over time. The articles, to be published on the first Monday of every month, will focus on different aspects of the securities market, ranging from the basics to specific topics.

Contributed by: The Cambodia Securities Exchange.

Market Operation Department

Email: [email protected].

Tel: 023 95 88 88 / 023 95 88 85.

Disclaimer: This article has been compiled solely for informative and educational purposes. It is not intended for any recommendations or for investment advice. The Cambodia Securities Exchange is not liable for any losses or damages caused by using it in such a way.