Logo of Phnom Penh Post newspaper Phnom Penh Post - $300M maiden sovereign-bond issue set to begin on Sept 7: NBC

$300M maiden sovereign-bond issue set to begin on Sept 7: NBC

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The National Bank of Cambodia (NBC). Heng Chivoan

$300M maiden sovereign-bond issue set to begin on Sept 7: NBC

The National Bank of Cambodia (NBC) announced that it will float the 100 billion riel ($25 million) first tranche of its 1.2195 trillion riel maiden sovereign-bond issue on September 7, which financial experts point out will allow the government to diversify funding sources for national development.

Government securities, including bonds, are a vital financial tool for governments to raise financing from the domestic private sector and from abroad for socio-economic development, as highlighted in a press release on the Senate session that approved the Draft Law on Government Securities.

In the September 5 announcement, the NBC said that the issuance – carried out in single-price auction format – will go live from 8am to 2pm, and that the tranche will be issued at par value of one million riel, carrying a fixed per-annum coupon rate of two per cent paid semiannually and a tenor of one year.

On August 25, the Ministry of Economy and Finance issued a statement confirming that the bond would be available in one-, three- and five-year terms with new issuances of the same tenor every four weeks, adding that a total 200 billion riel worth of one-year and five-year bonds, each, would be auctioned in two tranches, and a total 800 billion riel worth of three-year bonds would be auctioned in four tranches.

Speaking to The Post, Kim Sophanita, director of the Market Operations Department at the Cambodia Securities Exchange (CSX), suggested that the Kingdom’s sovereign bond debut would support the capital market’s transition to a more complete and adequate infrastructure, which she said has enabled “another stage of development”.

She underscored the government bond market’s importance and value for stakeholders, stating that state debt securities provide, among other things, financing alternatives for the government, additional investment options for institutional investors, and more financial instruments for effective monetary policy management, as well as benchmarks that help evaluate the performance of financial products.

CSX CEO Hong Sok Hour told The Post recently that when the bourse instituted the initial marketing process, there were plans to start with sovereign bonds because they are deemed “easy to issue” and attract a lot of interest from large-scale investors.

However, due to various regulatory frameworks that make it impossible for the government to issue securities, the bourse started out with stocks, he said.

He added that the sovereign securities are still in demand from large-scale investors, both domestic and foreign, as investment opportunities for institutions such as insurance firms, pension funds, the National Social Security Fund, and banks, which need to invest in high-security bonds at reasonable interest rates.

“For the first sovereign bond issuance, we expect to be able to attract investors who have been lacking in our market in the past – both local and foreign institutional investors,” Sok Hour said.

Speaking at a May 16 national conference on the CSX, finance minister Aun Pornmoniroth commented that sovereign securities would enable the state to raise funds for economic development.

“Government bonds are expected to be popular on the Cambodia Securities Exchange, and provide benchmark data for corporate securities trading and financial analysis, as is the case in countries with a growing securities sector,” he said.

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