Cambodia’s securities market grew significantly from 2019 to 2022 despite the Covid-19 pandemic, particularly with the listing of DBD Engineering Plc and JS Land Plc.
With more and more companies preparing for initial public offering (IPOs) and expanding their investment portfolios to invest in the Kingdom’s securities market,
the market is offering interesting investment options.
Investors can invest in the securities market with financial instruments such as equity securities or stocks, debt securities or bonds, and derivatives.
To decide which type of financial instrument to invest in, the investor should know the characteristics of and differences between each product.
• Equity securities or stock: Investing in equity securities or stocks will bring benefits such as dividends, capital gains, tax incentives, ownership rights, and other benefits attached to equity products.
Despite the Covid-19 pandemic, by 2021 the trading volume increased by 107.45 per cent and the daily trading volume by 114.6 per cent compared to 2020, which is a positive sign for the Cambodia Securities Exchange (CSX).
• Debt securities or bonds: Investing in debt securities or bonds will bring benefits such as the fixed coupon rate and principal at maturity, and allow for the priority to receive compensation in the case of liquidation or bankruptcy.
In this regard, bondholders face lower risks than shareholders.
• Derivatives: These are financial instruments that refer to Contract for Difference where the value is based on one or more underlying asset.
Common assets are stocks, bonds, precious metals, crude oil, natural gas, agricultural products and currencies – as well as the principal protected scheme – which are traded on the market.
Investors typically use derivatives to minimise risk, maximise leverage or estimate asset price fluctuations.
Since derivatives are complex financial instruments, investors should have experience and in-depth knowledge to be able to utilise the benefits and flexibilities of these instruments, otherwise they could be susceptible to high investment risk.
To be able to start investing in equities and debt securities listed on the CSX, an Investor Identification Number (Investor ID) is required.
The public can apply for an Investor ID online – at https://id.serc.gov.kh/ – or through securities companies licensed by the SERC.
After receiving the Investor ID, investors then have to open a trading account with a securities company and deposit money as required.
To invest in derivatives products, a trading account with a derivatives broker that is licensed by SERC has to be opened.
To make profit from their investment, investors should make sure they invest at the right time and for the right reasons.
This means that they buy or sell their securities based on strong considerations and on rational grounds, and not because of emotion or over-reaction from negative news on a company or the economy.
There are a few points that should be considered when investing in securities, including the price of securities and the company’s status, as well as domestic and international economic conditions.
Prepared by: Research, Training, Securities Market Development and International Relations Department of Securities and Exchange Regulator of Cambodia
Email: [email protected]
Tel: 023 885 611
