A Q&A with Stephen Hsu of Phnom Penh Securities

Would you describe the CSX opening as a success?  Why?

The CSX opening for first trading on 18th April was considered as a great success, since both local and foreign investors had significantly joined the trading for a total volume of 879,426 shares, or equal to 7.5per cent of total floating shares.

Has the stock performed how you thought it would?  Has it exceeded expectations?

Because of a very high demand on PPWSA shares since book-building stage (17 times oversubscribed), most investors tried to purchase more shares from this secondary market and pushed the share price to nearly reach the upper limit, KHR 9,300 or a 48 per cent increase from the offering price, for the first trading day. Even though the price was just a little bit shy of soaring, the climb did not exceeded expectations, as it was the first listed shares in Cambodia – a developing country. Meanwhile, we also believe that the price will continue going up for a while unless investors’ appetite on the shares is largely reduced.

What roll-outs of other IPOs do you see coming on the horizon and when?

In addition to 2 other state-owned enterprises – Telecom Cambodia and Sihanoukville Autonomous Port – Phnom Penh Securities(PPS) will list 2 to 3 private companies going public successfully by end of this year.

Do you give good marks to the SECC and the CSX for their performance?  Why?

Even though the Cambodia stock market had delayed twice, we still sincerely admire the hard effort of both the SECC and the CSX for preparing a strong base for efficient and effective market operations, which we could see on the first trading day, since investors were confident in investing.

How important is it for the development of the CSX to add more IPOs?

Having more IPOs is absolutely important for the growth of CSX:

Investors have more choices on investment.

They can reduce the risk through diversification strategy on different stocks and increase the liquidity of the market in order to attract more institute investors.

The Lao stock exchange is a good example to explain this: its market index has gradually been declining after reaching the peak on the 17th trading day, as it has not had any new companies listed for more than 1 year.

Does the opening of the CSX usher in a new era that enables foreign individuals and companies to gain exposure to the Cambodian economy for the first time?  What’s the significance of that?

Actually, gaining exposure for foreign investors to the Cambodian economy is already achieved through foreign direct investment (FDI); however, the opening of CSX is providing more rooms and chances for them to conveniently and quickly invest in Cambodia. Generally, developing countries always seek more funds from develop themselves, so inflow of foreign investors through the stock market is very significant for the development of Cambodia’s economy.

How does the development of Cambodia’s financial future look to you?  Challenges ahead? Opportunities?

We foresee that the development of Cambodia’s financial sector offers both more challenges and opportunities.

Challenges: competition between the stock market and banking institutions, and the market can provide more flexible funds to both seekers and providers with a very low cost compared to bank. As a result, banks would face more risks of withdrawal or bankruptcy due to not only internal competition (overcrowded banks) and also external thread (market).

Opportunity: the stock market will challenge banks to do more innovation on financial products and services, with an appropriate  and competitive fee. This encourages more saving and investment (capital mobilization) which can increase production capacity. Therefore, the opportunity is to help Cambodia take-off to a sustainable economic development.