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Bulls and bears on 'CamEx'

Bulls and bears on 'CamEx'

As plans for a Cambodia Stock Exchange begin to unfold, big name companies are divided over the prospect of tapping the new capital market themselves, or waiting, watching and letting others dip in first.

Some enthusiastic CEOs quietly harboring dreams of expansion for their firms said this week the late-2009 stock market launch is coming sooner than expected. But the lure of new capital for cash-poor Cambodian businesses is just what the economy needs, they said. And they'll be ready.

Others - including some deep pocket tycoons who control banks, hotels, telecoms and more - said they will not jump in, but will wait and see.

Many potentials investors say they are bullish about the prospects for a Cambodian Stock Market, others say "where's the beet?"

Some key questions about the joint venture between the Korean Exchange and Cambodia's Ministry of Economy and Finance were still unanswered including how restrictive the audits and disclosure requirements will be and what size companies will be allowed to apply.

Among the companies that said they want to be listed and have specific capital expansion plans were:

    * Sokimex, Cambodia's petroleum distributor, whose Sokha Hotel development arm has big resorts in Siem Reap and Sihanoukville

    * Acleda Bank, the micro-finance expert and NGO-turned commercial bank that has become the second biggest lender in Cambodia

    * Union Commercial Bank, a conservative lender that was one of the original banks licensed in 1995.

"Yes, the answer is positive," said Union Commercial Bank's chief executive Yum Sui Sang. "The set date of 2009 is earlier than I expected but it shows how keen the government is to help the capital market in Cambodia," he said. The one time Hong Kong banker who came to Phnom Penh in 1994 to apply for a banking license said he would use new capital to make his bank "more aggressive."

Acleda Bank President and CEO In Channy was just as positive. "We want to list on the market so we can grow and grow. We need to raise capital. Investors need to be able to invest, and then to exit," he said.

Sok Kong, chairman of petroleum company Sokimex, said he wants to bring investors into his company and he is in the process of hiring an outside auditor to help prepare the company. He said he needs $200 million for his hotel development plans.

Others welcomed the set up of the stock exchange but said they were not yet ready for it themselves.

"I have not decided. I have to wait and see other companies first," said Kong Triv, chairman and CEO of KT Pacific Group Co. "It requires a clear audit," he said. KT Pacific is involved in construction, food and tobacco industries and electronics and is a partner in Anco Specialized Bank.

Royal Group Chairman Kith Meng, whose Royal Group owns the Cambodiana Hotel and has large stakes in CTN television and mobile company Mobitel, and a joint venture with Australia's ANZ Bank , among other holdings, said he has not decided either. "For my company I will watch to see the time when it is possible," said Kith Meng.

Officially however, as chairman of the Cambodia Chamber of Commerce he said: "I think it is good to have a stock exchange which will provide the opportunity to local companies to sell stock to the public and get more capital for expanding their investment projects."

ANZ Royal Bank's chief executive officer Dean Cleland "breaks groundé" at the newest ANZ porperty at a ceremony on September 12. The block on Mao tse Tung Blvd is set to house the largest ANZ branch in Phnom Penh which company executives say will be a completely "econofriendly" buildng. ANZ branch currently has 11 branches throughout the Kingdom with plans to expand in the coming months

While the big groups may well have sources of funding for their capital needs - Kith Meng is reputed to be the country's wealthiest entrepreneur - they are the exception not the rule in a climate where companies often complain of insufficient bank lending.

Cambodia announced a program to establish the country's first securities market in 2009 in a partnership with the Korean Exchange on September 6. Within a week lawmakers debated and passed a 69-page securities law.

A Korea Exchange (KRX) official said the deal signed between the KRX and the ministry gives KRX 49 percent and Cambodia 51 percent of the project.

Prime Minister Hun Sen, attending the announcement ceremony, called a securities market the "lifeblood of a capitalist economy which will actively contribute to mobilizing financial resources."

The main opposition to the stock exchange came from Party leader Sam Rainsy who said he was concerned that a lack of transparency and an overall high level of corruption in Cambodia would lead to a corrupt stock market.

Minister of Finance Keat Chhon told the National Assembly he expected 20 companies on the initial exchange.

But Inpyo Lee, the project director working in Cambodia for the Korea Exchange, estimated five companies will initially list. He compared Cambodia's economy today to Vietnam ten years ago when it opened its stock exchange with five companies listed.

"Economic transparency is the most important thing," he said. If they don't want to disclose these things they will not be listed."

KRX 11 years ago helped Vietnam set up its stock market. Lee said the exchange made no profit for five years, but since then it has taken off though is still considered "a high risk market."

In the coming weeks the officials working on the exchange will develop the listing requirements for Cambodia exchange.

"If we set the capital requirements too high the number of companies that can qualify will be too small. If we set the capital requirement too low, the risk will be increased for the investors," explained Lee.

At Acleda Bank, president In Channy noted that although he wants Acleda to be able to access new capital through the stock exchange, much work remains to be done in Cambodia before an exchange can open. For one thing, the country needs an inter-bank lending law allowing banks to borrow easily from each other, he said. He also expressed doubts that very many companies in Cambodia will want to comply with disclosure requirements intended to make a stock exchange safe for investors.

"Disclosure in Cambodia is hard for many enterprises. How much tax did you pay, did you pay regularly ... do you have that tax liability," he said, are not questions some companies like to answer.

Others weren't concerned about that.

"They will disclose; they will meet the requirement. I don't worry much about that. They have their ways. There is a loss of cash-rich companies here in Cambodia. That is a driving factor. Those companies that list will have a better name socially. And sooner or later, Cambodia will be free of corruption," reasoned Yum Sang of Union Commercial Bank.

"If the Securities Commission has a good team they can develop it with transparency and good governance so overseas investors will come," said Yum Sang.

The companies that are already eying the market said they have specific plans for what they would do with the new capital.

Yum Sang said he would expand the bank to new markets. "What would we do with the money? My dream is to expand the bank. Make it more aggressive. Make it bigger," he said.

Sokimex Group Chairman Sok Kong, who built his company from ten employees in 1991 to about 3,000 today, said he wants new capital to expand hotels in Sihanoukville and Siem Reap.

"The banks only allow us to borrow a limited amount of money at a high interest rate," said Sok Kong.

The law on the issuance and trading of securities passed by the National Assembly spells out the codes of conduct for securities firms, the disclosure application process, provides for a committee at the Financial Markets Division of the Ministry of Economy and Finance to work on the project until an independent supervisory agency is established to regulate the market. It defines hundreds of terms such as "controlling interest" but it doesn't discuss criteria for getting on the exchange.

Lee, the KRX advisor, is already running training programs to prepare future bourse employees as well as private company employees interested for their own reasons.

Interest among private companies is high, he said. Training in Phnom Penh has included sessions on securities training theory and building the securities exchange infrastructure. Groups of trainees are also being sent to South Korea for training. Eventually potential investors will be offered training. Lee said his task was daunting, but work will move ahead. "In 2009, I am sure they will be ready," he said. "It could be December," he added.


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