Phnom Penh Post, Written by George Mcleod and Brendan Brady
Wednesday, 01 October 2008
CamEx’s 2009 launch date was widely regarded as optimistic, but now some business leaders say global financial crisis could push things back further
WITH global markets in turmoil, business leaders say the much-anticipated launch of the Cambodian stock exchange could slide back by up to a year.
“Before the crisis hit, we had some doubts over whether the market would be able to launch [on time]. Now [the crisis] adds to the problems,” said In Channy, CEO of Acleda Bank, in an interview with the Post last week.
The exchange was scheduled to start trading by 2009 under an agreement with Korea Exchange signed September 2007.
Initial progress was encouraging with Cambodian lawmakers debating and passing a 69-page securities law within a week of the deal being inked.
But with the global financial turmoil slowly spreading to Korea, China and Japan, liquidity has evaporated as investors flee equities.
The second biggest lender in Cambodia, Acleda, was among the first major companies to say they wanted to be listed and had specific capital expansion plans. But the bank’s CEO now says that while the company fully supports the stock exchange in principle, current market conditions may delay the launch.
“Perhaps it will take until 2010,” said In Channy.
Even before the crisis hit Asia, the nascent stock exchange had encountered a string of problems.
Key questions about the joint venture between the Korean Exchange and Cambodia’s Ministry of Economy and Finance remain unanswered, including how restrictive the audits and disclosure requirements will be and what size companies will be allowed to apply.
Crisis not relevant
According to Nguon Meng Tech, director general of the Cambodian Chamber of Commerce, the US economic crisis’s impact on Asian markets is not linked to the delay of the CamEx launch.
“Even before this problem in the US, I didn’t think the stock market would be ready for another three, four or five years,” due to a lack of transparency in Cambodia’s business environment, he said.
While he identified a lack of transparency as the main culprit, he told the Post Tuesday that the 2009 deadline was also unrealistic as the county lacked a class of informed and knowledgeable investors.
“Even rich people in Cambodia know nothing about stock markets. They have money but they are from the war generation. We’ll probably have to wait until their kids who are educated overseas return, so we’ll need another few years.”
Nguon Meng Tech cautioned the stock market not be rushed into a launch in the absence of credit asset evaluations.
The requirement that companies declare their assets is widely believed to be one of the biggest obstacles to establishing Cambodia’s stock market. Most enterprises that could list are family-owned and guard the value of their businesses.
A prominent business leader in Cambodia said that the predictable teething pains of the stock exchange were a sensitive issue.
“Everyone supports the idea of launching the exchange, but there has been an understanding for some time that the country and the legal system just aren’t ready,” he said.
But many Cambodian business say new capital is just what the economy needs. When plans for CamEx were first announced in September 2007, Prime Minister Hun Sen called a securities market “the lifeblood of a capitalist economy which will actively contribute to mobilising financial resources.”
Marvin Yeo, Managing Partner at Frontier Investment and Development Partners, said that even with the difficulties facing the exchange, he expects the market may be launched on time in a limited form.
“I think the stock market is a great thing for the country, and I see it being launched on time. It will probably take one or two years to go through its teething process, but I think it will work out.”
Cambodia’s first agency to assess the value of corporate assets opened earlier this month, but business figures were skeptical the new body will be able to establish sufficient nationwide transparency in time to meet the 2009 deadline.