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Bonds starting to take shape

Traffic passes the Securities and Exchange Commission of Cambodia (SECC) head office in Phnom Penh’s Sen Sok district yesterday.
Traffic passes the Securities and Exchange Commission of Cambodia (SECC) head office in Phnom Penh’s Sen Sok district yesterday. Hong Menea

Bonds starting to take shape

The Cambodian government is finalising legislation that would regulate the establishment of a corporate bond market, and plans to find a suitable private sector company to pilot the first issuance, officials said yesterday.

Speaking during a public consultation on a prakas on public offering of debt securities, Sou Socheat, director-general of the Securities and Exchange Commission of Cambodia (SECC), said corporate bonds would provide a new avenue for companies to raise funds for capital improvements, expansions, debt refinancing or acquisitions.

“Soon, private companies in Cambodia will have more options to raise funds, whether through the issuance of equity securities or debt securities,” he said. “The more securities products available in the market, the more choices investors have, which will bolster confidence and attract more investors to the market.”

A corporate bond is a debt security issued by a company that pays interest periodically and repays the principal upon maturity. Yesterday’s public consultation gave stakeholders an opportunity to review and comment on a draft prakas that would govern the public offering of corporate bonds, including secured and guaranteed bonds. The prakas contains 10 chapters and 51 articles, and included the proposed fees for bond issuance.

While Socheat could not give a timeline for the legislation’s passage, he said the SECC hoped it would come into effect later this year. The SECC is also seeking a strong company to pilot bond issuance and demonstrate to investors the viability of a bond market in Cambodia.

Cynthia Liaw, CEO of Maybank, said the launch of corporate bonds in Cambodia would provide private firms with a much-needed way of raising funds for large projects, complementing the role of banks.

“Most of the banks here, the loans that they are giving are small like $500,000 to $1 million, so have having this debt security in capital market will allow very good companies who need financing for bigger amounts, let’s say for example, for development of a condominium, or some other big infrastructure in maybe the $5 million to $20 million [range], they will be able to use this revenue to do that,” she explained.

Han Kyung Tae, managing director of Yuanta Securities (Cambodia), said the introduction of debt securities would be a positive step in the development of Cambodia’s capital market, and would provide a good source of capital for local businesses.

However, he said it may still be too early for these debt instruments as they more logically follow the introduction of government bonds and established bond credit ratings.

“A government bond and its interest rate [would serve as] a benchmark rate, but we don’t have a benchmark rate right now,” he said.

The SECC is reportedly working toward the issuance of Cambodia’s first government, bond by 2018.

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