Dol­lar to help se­cu­ri­ties mar­ket grow

The Phnom Penh Post - - BUSINESS - Hin Pi­sei

IN­DUS­TRY in­sid­ers say it is bet­ter to use the US dol­lar in trad­ing trans­ac­tions when cor­po­rate bonds are is­sued for the first time in the Cam­bo­dian se­cu­ri­ties mar­ket next year. This, they say, will help grow the sec­tor faster.

The mat­ter was raised dur­ing a dis­cus­sion at a sem­i­nar on “Un­der­stand­ing Cam­bo­dia’s Se­cu­ri­ties” which was held re­cently at the Cam­bo­dia Se­cu­ri­ties Ex­change (CSX) Build­ing in Ph­nom Penh.

RHB In­dochina Se­cu­ri­ties Plc CEO Iv Ra­narith said re­quir­ing the use of Kh­mer riel in the Cam­bo­dian se­cu­ri­ties mar­ket could cre­ate a ma­jor is­sue and strain the de­vel­op­ment of the se­cu­ri­ties sec­tor in the coun­try.

He said that hav­ing con­sulted with se­cu­ri­ties ex­perts abroad, they ar­gued that Cam­bo­dia is a dol­lar-de­nom­i­nated mar­ket, so if it uses the dol­lar, it will have more op­por­tu­nity for faster growth and could also be­come one of the re­gional cap­i­tal mar­kets.

In de­fense of the riel

“It would be eas­ier for Cam­bo­dia to de­velop its se­cu­ri­ties mar­ket through the dol­lar [more so than in the se­cu­ri­ties mar­kets of other na­tions], as there is a lot of US cur­rency in the Cam­bo­dian econ­omy, as op­posed to other coun­tries,” he said.

Fur­ther­more, while most Cam­bo­di­ans get their salaries in dol­lars, he said, they must usu­ally first ex­change their money into riel when they want to in­vest, cre­at­ing an ob­sta­cle when in­vest­ing in the sec­tor.

His views were echoed by Hor Likea, the act­ing di­rec­tor of Re­search and Train­ing at the Depart­ment of Se­cu­ri­ties Mar­ket De­vel­op­ment and In­ter­na­tional Re­la­tions, Se­cu­ri­ties and Ex­change Com­mis­sion of Cam­bo­dia (SECC).

Likea said in the past, some in­sti­tu­tions and com­pa­nies want­ing to in­vest in the Cam­bo­dian se­cu­ri­ties mar­ket raised their con­cerns re­gard­ing the use of the riel for trans­ac­tions as their in­come was in dol­lars.

She said the SECC lead­ers have raised the is­sue with the Min­istry of Econ­omy and Fi­nance to study the pos­si­bil­ity of im­ple­ment­ing a pol­icy which can push com­pa­nies that earn in­come in US dol­lars to in­vest in the Cam­bo­dian stock mar­ket.

“If we can solve this prob­lem, we think they [com­pa­nies] will join the se­cu­ri­ties mar­ket,” she said.

How­ever, the aim of us­ing the US cur­rency in se­cu­ri­ties trans­ac­tions con­flicts with the Na­tional Bank of Cam­bo­dia’s (NBC) pol­icy of pro­mot­ing the use of more riel in the econ­omy and re­quir­ing its use in the se­cu­ri­ties mar­ket for the same rea­son.

At the end of 2016, the NBC is­sued a state­ment, in­struct­ing all com­mer­cial banks and mi­cro­fi­nance in­sti­tu­tions to re­lease at least 10% of its to­tal loans in riel, a reg­u­la­tion that will take ef­fect by the end of next year.

Growth of a new mar­ket

How­ever, Ra­narith said the use of riel in se­cu­ri­ties trad­ing op­er­a­tions does not ap­pear to be of much help in pro­mot­ing the cur­rency’s use.

He said if the gov­ern­ment re­ally wants to pro­mote the use of the riel and, at the same time help boost the se­cu­ri­ties sec­tor, it should be done as the gov­ern­ment is do­ing with the bank­ing sec­tor – us­ing US cur­rency in the be­gin­ning and grad­u­ally switch­ing to riel.

Con­fi­dence in the sta­bil­ity of the riel may also be a fac­tor im­ped­ing the in­vest­ment ob­jec­tives of ma­jor in­vestors.

CSX’s List­ing and Dis­clo­sure Depart­ment di­rec­tor, La­mun Soleil, said yes­ter­day that if the au­thor­i­ties al­low the use of the dol­lar, the se­cu­ri­ties mar­ket would grow faster than it did at present.

This, he said is be­cause the pub­lic, and es­pe­cially ma­jor in­vestors, do not have com­plete con­fi­dence in the riel’s sta­bil­ity.

“If cor­po­rate bonds can­not be is­sued in US cur­rency, the Cam­bo­dian stock mar­ket will have dif­fi­culty grow­ing,” he said, re­fer­ring to HKL Mi­cro­fi­nance In­sti­tu­tion’s cor­po­rate bond that is sched­uled to be of­fered later this year.

Ac­cord­ing to Solei, all fi­nan­cial in­sti­tu­tions want to is­sue cor­po­rate bonds in US cur­rency be­cause its is­suance is al­ways made in large amounts of money, and large com­pa­nies, es­pe­cially for­eign ones, do not want to buy in riel.

He said is­su­ing cor­po­rate bonds in dol­lars would be easy to sell and the coupon rate paid to buy­ers is also lower than if the pur­chase was in riel.

There are five listed com­pa­nies in the CSX, with two oth­ers plan­ning to is­sue shares later this year.


As cor­po­rate bonds are planned to be is­sued for the first time in the Cam­bo­dian se­cu­ri­ties mar­ket, in­dus­try in­sid­ers are say­ing the use of the cur­rency will help the sec­tor grow faster.

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