The Development of Securities Market in Cambodia
Cambodia inteded to establish its securities or stock market in 1995, but due to the weak banking system which cannot effectively complement the establishment of this market, the government of Cambodia postponed the project and reset the year 2009 as the starting year of the securities market.
What are the benefits for Cambodia from the development of the securities market?
Answer:
- In addition to bank deposits which are basically held on short term basis, capital market will increase the mobilization of savings, by providing an array of attractive saving instruments, which can be used for financing long term investments. Capital market also provides a convenient mechanism for channeling foreign savings into portfolio investment. At present Cambodia can only attract FDI since capital market and associated securities exchange infrastructure do not exist yet. Foreign portfolio investment will become a possibility once the securities exchange is established and rules are framed for foreigners to invest in Cambodia securities onshore.
- It will lead to a more rational allocation of resources because funds, which would otherwise be spent on consumption, or kept in idle demand deposits with banks, are mobilized and redirected to promote productive business activities;
- Investors are usually reluctant to participate in long-term investment projects, even those with high return. With a capital market, investors can stay liquid while investing long term;
- Securities market improves corporate governance through information disclosure requirements which ensure better management standards and efficiency;
- Public companies owned by a multiple of stocks holders through the stock exchange and subject to regulation tend to have better management records than privately-held companies;
- Companies can require other companies through the securities market for expanding product line and market share, increasing distribution channels, hedging against volatility, and acquire other necessary business assets;
Securities exchange will provide a marketplace that:
- Enhance the liquidity of securities and promotes fair trading prices that reflect the relative strength of supply and demand. With this function, investors can invest in securities with full information and enterprises can raise funds smoothly by issuing securities;
- Published market clearing prices will be the correct indicators of company performance on a rational basis and can be used for assessing the collateral value or the asset value of underlying securities.
For investors of listed securities, the advantages are the following:
- Opportunity to buy and sell securities at market determined, fair price;
- More choices of saving instruments;
- Participation in ownership of a company satisfying strict corporate governance norms;
- Higher trust and higher name value;
- The market value of the securities can be used with more assurance as an indicator of the underlying corporate value;
- The securities of listed companies can be used as currency in Merging and Acquisition dealings.
Phases of Capital market development in Cambodia:
The capital market development plan under the strategy consists of three sequenced development phases as discuss below:
Phase 1 (2006-2009): Comprising
- Enactment of Law on Government Securities. This was accomplished on 10 January 2007. Ministry of Economy and Finance is preparing the sub-decree and Prakas under the law;
- Operation of government securities market should precede the establishment of a private securities market. This will help gain public investor confidence and get the investors to familiarize themselves with the functioning of the securities market.
- Development of appropriate regulatory framework relating to insolvency, and the progressive company framework;
- Enactment of Law on Issuance and Trading of Non-Government Securities. The law was adopted in 2007;
- Continuing improvement of accounting/auditing capacity;
- Implementing the MOU with Korean Exchange (KRX);
- Training to raise public awareness, investor education and human resource development to support financial market development
Phase 2 (2009-2012): Comprising
- Implementing progressive, graduated framework for companies;
- Launch of the Cambodia Securities Exchange in 2009;
- Opening a securities depository in the CSE for all public companies in operation and a public company registration authority;
- Implementation of rules on Financial governance and regulation;
- Continuing development of financial information and company regulation;
- Ensuring that public offering of securities will be permitted only through the securities exchange
- Design of investor compensation scheme to address risks of failure of securities intermediaries holding client assets
Phase 3 (2012-2015): Comprising
- Development of investment funds;
- Development of pensions/provident funds scheme;
- Development of securitization framework/institution;
- Development of derivative market;
- Provide tax incentives to attract investors in government securities
- In addition to bank deposits which are basically held on short term basis, capital market will increase the mobilization of savings, by providing an array of attractive saving instruments, which can be used for financing long term investments. Capital market also provides a convenient mechanism for channeling foreign savings into portfolio investment. At present Cambodia can only attract FDI since capital market and associated securities exchange infrastructure do not exist yet. Foreign portfolio investment will become a possibility once the securities exchange is established and rules are framed for foreigners to invest in Cambodia securities onshore.
- It will lead to a more rational allocation of resources because funds, which would otherwise be spent on consumption, or kept in idle demand deposits with banks, are mobilized and redirected to promote productive business activities;
- Investors are usually reluctant to participate in long-term investment projects, even those with high return. With a capital market, investors can stay liquid while investing long term;
- Securities market improves corporate governance through information disclosure requirements which ensure better management standards and efficiency;
- Public companies owned by a multiple of stocks holders through the stock exchange and subject to regulation tend to have better management records than privately-held companies;
- Companies can require other companies through the securities market for expanding product line and market share, increasing distribution channels, hedging against volatility, and acquire other necessary business assets;
Securities exchange will provide a marketplace that:
- Enhance the liquidity of securities and promotes fair trading prices that reflect the relative strength of supply and demand. With this function, investors can invest in securities with full information and enterprises can raise funds smoothly by issuing securities;
- Published market clearing prices will be the correct indicators of company performance on a rational basis and can be used for assessing the collateral value or the asset value of underlying securities.
For investors of listed securities, the advantages are the following:
- Opportunity to buy and sell securities at market determined, fair price;
- More choices of saving instruments;
- Participation in ownership of a company satisfying strict corporate governance norms;
- Higher trust and higher name value;
- The market value of the securities can be used with more assurance as an indicator of the underlying corporate value;
- The securities of listed companies can be used as currency in Merging and Acquisition dealings.
Phases of Capital market development in Cambodia:
The capital market development plan under the strategy consists of three sequenced development phases as discuss below:
Phase 1 (2006-2009): Comprising
- Enactment of Law on Government Securities. This was accomplished on 10 January 2007. Ministry of Economy and Finance is preparing the sub-decree and Prakas under the law;
- Operation of government securities market should precede the establishment of a private securities market. This will help gain public investor confidence and get the investors to familiarize themselves with the functioning of the securities market.
- Development of appropriate regulatory framework relating to insolvency, and the progressive company framework;
- Enactment of Law on Issuance and Trading of Non-Government Securities. The law was adopted in 2007;
- Continuing improvement of accounting/auditing capacity;
- Implementing the MOU with Korean Exchange (KRX);
- Training to raise public awareness, investor education and human resource development to support financial market development
Phase 2 (2009-2012): Comprising
- Implementing progressive, graduated framework for companies;
- Launch of the Cambodia Securities Exchange in 2009;
- Opening a securities depository in the CSE for all public companies in operation and a public company registration authority;
- Implementation of rules on Financial governance and regulation;
- Continuing development of financial information and company regulation;
- Ensuring that public offering of securities will be permitted only through the securities exchange
- Design of investor compensation scheme to address risks of failure of securities intermediaries holding client assets
Phase 3 (2012-2015): Comprising
- Development of investment funds;
- Development of pensions/provident funds scheme;
- Development of securitization framework/institution;
- Development of derivative market;
- Provide tax incentives to attract investors in government securities
1 comment:
Thanks for sharing and detail describing on the topic. I hope the stock market will mobile money under the pillow of Cambodian people in to business and bring growth.
waiting for more intersting topic.!
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