Hong Kong - Casino operator NagaCorp is facing troubled waters as it races towards
its second attempt at listing on the Hong Kong Stock Exchange in a bid to raise up
to US$77 million.
The prospect of the US Federal Reserve contining its policy of raising interest rates
and risk eroding growth in the world's largest economy has resulted in stocks markets
around the world taking a beating, and Hong Kong is no exception.
As the Fed raises rates other central banks are forced to follow suit to maintain
parity and support their currencies. This raises the cost of borrowing at home and
crimps spending habits, and that's another brutal combination that no stock market
can afford to ignore.
Since the rout started in mid-May, when many markets were trading at record highs
and investors were receptive to further listings like Naga, the sell-off has resulted
in falls of between 15 and 30 percent.
Billions of dollars have been written off the value of benchmarks, like Hong Kong's
Hang Seng index, and rising interest rates mean bonds and bank deposits are now emerging
as more attractive investments than the stock market.
This could prove troublesome for Malaysian tycoon Chen Lip Keong, who reportedly
wants to make the Naga share sale before a placement is made in Hong Kong by Macau
tycoon Stanley Ho's giant Sociedade de Jogos Macau (SJM) in July.
The size of Ho's US$1.9 billion placement will dwarf the Naga offer, and Ho's statesman-like
position among fund managers will ensure enough capital has been allocated to meet
the costs of SJM's raising - even amid a stock market rout.
SJM intends to list in July and this threatens to leave Naga out in the cold when
it comes to attracting funds from the capital markets.
Hence Chen's rush at the worst possible time since Naga won an appeal from Hong Kong
stock exchange regulators to list earlier this year.
That appeal was hard fought and goes to the heart of Cambodia's international reputation
Previous efforts to list in Hong Kong, and in Singapore, had been blocked by regulators,
partly due to a lack of internal controls within the company to address money laundering
However, in a rare victory for Cambodia, Naga won the appeal in Hong Kong after Phnom
Penh joined the Asia-Pacific Group, an alliance of 28 national governments working
to stem cross-border money laundering.
NagaCorp owns the only legal casino operating in the Phnom Penh and according the
reports notched-up annual revenue of US$ 61.7 million in 2002. Most of its gamblers
come from Thailand, China, Hong Kong, Malaysia and Singapore.
In the grander scheme of markets Naga remains a minnow in terms of earnings and the
size of its listing, and unless signs of slowing US interest rate hikes emerge to
sooth investor anxiety, the Hong Kong listing could prove much harder than recently