Logo of Phnom Penh Post newspaper Phnom Penh Post - Currency risk in CSX two-day settlements

Currency risk in CSX two-day settlements

Currency risk in CSX two-day settlements

THE Securities and Exchange Commission of Cambodia is set to require trades on the new stock exchange to be settled after two days, as experts said the timeframe ought to be kept as short as possible.

Although analysts widely supported the timeframe, called ‘T + 2’ in a draft prakas, or edict, obtained yesterday, they said a shorter settlement period will minimise the impact of currency fluctuations on transactions.

Companies are set list on the Cambodia Securities Exchange in riel, but settlements are allowed in either local currency or dollars for the first three years of operation.

Asian Development Bank’s Principal Economist at the Office of Regional Economic Integration Jayant Menon wrote yesterday that it was the settlement period where exposure to currency risk really exists, given the currency of listing and the currency of settlement could differ.

“Therefore, the shorter the better,” he said. “… T+2 is quite short, especially for an emerging market.”

The main challenge for the clearance system was the legal and regulatory framework, he said.

“These need to be strengthened, and the National Bank of Cambodia needs to be actively involved in ensuring this,” he wrote.

ACLEDA Securities Director Svay Hay said he supported two-day time frame.

“It is acceptable for us because we will have enough time to [complete] operations,” he said. “Using T+2 is very good – we don’t aim to use T+3 or more, which takes too much time.”

Svay Hay allowed that there would be some exchange rate risk for investors with capital in United States dollars if the riel fluctuated – but he added the riel had remained relatively stable over the last few years.

“We don’t have large fluctuations [in the value of the riel],” he said. “This is good, as it will draw investors to the market.”

Cambodia Securities Exchange Chief Executive Officer Hong Sok Hour said the SECC continued to work on the more complex regulations to ensure a successful exchange, which is set to launch in July.

“We are a new market, we will have some difficulty with the first step – that is why we want to develop simple [regulations],” he said.

ACLEDA Bank, CANADIA Bank, and the Bank for Investment and Development of Cambodia have been licensed as cash settlement agents by the SECC earlier this month.

Operators of a clearing facility will also be obligated to set up accounts under the oversight of the CSX, according to the draft parkas obtained yesterday.

Trading hours will initially be set from 8:00 am to 11:30 am, and trades are scheduled to be executed twice daily, at 9:00 am and 11:30 am.

Trading days are slated to be Monday to Friday, except public holidays.

Members who failed to settle a trade may see their trade cancelled, or have their trading suspended for a fixed period of time.

The SECC will hold public consultations on the timeframe – termed “T+2” – today and Wednesday, as well as the other provisions included in the draft “Rules on Securities Market Operations” prakas.

MOST VIEWED

  • Seven positive for Covid-19, Hun Sen confirms local transmission

    Prime Minister Hun Sen announced that there has been local community transmission of Covid-19. However, he urged the people not to panic even though the Ministry of Health announced the discovery of seven new cases on Sunday. Among the victims are Chhem Savuth, the director-general

  • Over 110 garment factories close

    A government official said on November 22 that at least 110 garment factories had closed in the first nine months of the year and left more than 55,000 workers without jobs – but union leaders worry those numbers could be much higher. Ministry of Labour and Vocational Training undersecretary

  • PM confirms community transmission, calls for unity

    Prime Minister Hun Sen has called on the public to stay calm, unite and follow the Ministry of Health guidelines after the wife of a senior official tested positive for Covid-19 in the Kingdom’s first case of community transmission. The case has drawn criticism

  • Singapore group seeks $14M in damages from PPSP over ‘breach of contract’

    Singapore-based Asiatic Group (Holdings) Ltd is seeking a minimum of $14.4 million relief from Cambodia Securities Exchange (CSX)-listed Phnom Penh Special Economic Zone Plc (PPSP) for allegedly breaching a power plant joint venture (JV) agreement. Asiatic Group’s wholly-owned Colben System Pte Ltd and 95 per

  • PM vows to protect Hun family

    Prime Minister Hun Sen has vowed to continue his fight against opposition politicians who he said intend to smash the Hun family. Without naming the politicians but apparently referring to former leaders of the Supreme Court-dissolved Cambodia National Rescue Party (CNRP), Hun Sen said there

  • Cambodia lauded for fight against Covid-19

    Cambodia has drawn global accolades for its handling of the Covid-19 pandemic, with a new report finding that the Kingdom has controlled the pandemic better than any other country in Asia. Dr Takeshi Kasai, director of the World Health Organisation’s (WHO) Western Pacific region,