Since its establishment in 2011 to regulate the securities industry, the Securities and Exchange Commission of Cambodia (SECC) has come a long way in building a steady and investor-friendly capital market.
After a lively 2020, the Cambodian securities market is aiming to set a similar pace in 2021, with at least two more initial public offerings (IPO) in the pipeline.
While stock exchanges around the globe took hits from the unpredictable economic headwinds due to the coronavirus crisis, the Cambodian capital market was on a growth trajectory.
It performed better than other sectors in the Kingdom, such as tourism, construction, garments and manufacturing, which all suffered due to the Covid-19 outbreak that disrupted the economy.
Certainly, the numbers are looking strong.
In 2020, the Asian Development Bank (ADB) forecast that the Cambodian economy would decline by around four per cent but rebound to 5.4 per cent in 2021.
Another positive indicator is the World Bank’s forecast released in December that revealed that foreign direct investment (FDI) inflows into sectors such as agriculture and the manufacturing of bicycles, electronic parts, vehicle parts and accessories for export have been on the rise.
In addition, rice and farm product exports have surged, while domestic tourism is also picking up.
Meanwhile, Cambodia will receive trade privileges under the UK’s new Generalised Scheme of Preferences (GSP) from January 1, after the EU partially withdrew its Everything But Arms (EBA) scheme.
Given these developments, with improved growth and strong economic fundamentals, the securities market is expected to be on strong footing in 2021.
In 2020, the number of issuers rose significantly, with two IPOs and three bond listings despite an uncertain economic outlook.
In the first 11 months of that year, market capitalisation rose from $716.07 million to $2.45 billion – a 242 per cent jump compared to the same period the previous year.
In 2021, a number of other factors are set to drive the Kingdom’s capital market.
The Senate on December 21 approved a draft law that allows the government to raise bonds on the capital market – considered a risk-free financial instrument, this is an important tool to finance government investment, and one that will further boost the capital market.
The move by the CSX to waive trading fees for investors using the Mobile Trading System for the whole of 2021 is another bonus for investors.
And the new Collective Investment Scheme (CIS) securities product will be made available on the market to provide a further option for investors.
Another key factor is the government’s incentives such as the 100 per cent tax free on capital gains and 50 per cent deduction on withholding tax, dividends and interest rate, which are all yet to be taxed.
The growing volume of trading activities on the securities market clearly reflects the attractiveness of the CSX as a viable option for investors.
There has been a remarkable increase in investors – from a measly 8,000 in 2017 to almost 26,000 in 2020.
With these numbers indicating a growing awareness of the Cambodian stock exchange and its benefits among the public and potential investors, the joint efforts of the SECC and other market players to promote the capital market through training programmes, seminars and workshops have indeed paid dividends.
