The Kingdom’s corporate bond market has recorded increased trading activity compared to this year’s first quarter. Heng Chivoan
The government recently approved a tax incentive for debt securities to draw the public into investing in the Cambodia Securities Exchange (CSX).
The issuing companies of corporate bonds and investors who buy and sell them will be entitled to a refund of a percentage of their withholding tax, said a May 5 prakas issued by the Ministry of Economy and Finance and signed by Minister Aun Pornmoniroth.
Public investors will receive 50 per cent of withholding taxes for three years collected during the period between January 1, 2019 and December 31, 2021.
The decision is based on the second issue of the Sub-decree No 01 on Tax Incentives for the Securities Sector, which was signed by Prime Minister Hun Sen on January 4, last year, said the prakas.
The prakas is an implementation guideline to be used in tandem with the Law on Taxation on withholding tax for investors in the debt securities sector.
In addition it sets the withholding tax rate at six per cent for residents and 14 per cent for non-residents.
Securities and Exchange Commission of Cambodia (SECC) director-general Sou Socheat told The Post on Thursday that once the prakas is put into action, “the government will start to collect taxes” from the nascent corporate bond market.
Hattha Kaksekar Limited became the first company to list a corporate bond on the CSX on December 5, 2018.
Socheat said the prakas “will help the current situation and make the tax rate clear to investors.
“We’ve seen confidence in our market grow among public investors,” he said.
CSX vice-chairman Ha Jong-weon said the prakas provides a clear guideline for securities companies and investors regarding withholding tax rates.
“Investors know clearly how much of a tax incentive they will receive from their investments in the securities sector and there will be more investors intending to invest in and boost the bond market,” he said.
In the last few weeks, Ha said, the market has recorded increased trading activity compared to this year’s first quarter.
“I hope when Acleda Bank [Plc] lists on the CSX, it will bring more market liquidity and more investor attention. At the same time it is a good opportunity for other financial institutions to consider diversifying their sources of funding via the securities market.”
The CSX welcomed its first domestically listed company, the Phnom Penh Water Supply Authority, on April 18, 2012. As of this month, the market has 11 listed firms – six bond-listed companies and five stock-listed companies.
The listed firms have raised $223 million in trading. Market capitalisation increased 58 per cent from $442 million in 2018 to around $701 million last year. Trading volume increased nearly six-fold from $26,000 in 2018 to around $150,000 last year.
As of last year, there were five central counterparties in the derivatives market, 27 derivatives brokers, five fund management companies and five trustees.
