Cambodia’s corporate sector can look forward to robust earnings, strong growth and an active economy.
According to Anthony Galliano, the CEO of Cambodia Investment Management, corporate earnings can see a strong upward trend as a result of very positive gross domestic product (GDP) expansion.
“Large corporates will enjoy robust earnings growth on the back of strong GDP growth, moderate inflation and solid increases in foreign direct investment [FDI]. These figures have reached record levels in 2018 and followed and followed with a rigorous first quarter of 2019.”
He told The Post that sectors like the construction, real estate, agriculture, financial and garment are benefiting from the rising economic tide.
However, Galliano said that there could be some soft spots in certain areas but this will be mitigated by the ongoing trade war between the US and China.
“There are some weak spots, especially in tourism and hospitality, but Cambodia should benefit further in 2019 from the ongoing trade dispute between the US and China.
Galliano added that he expects another stellar performance in corporate earnings for the first half of this year.
“Barring any unforeseen surprises, broad negative global events, or accelerated action by European Union on EBA [Everything But Arms], Cambodia should record another outstanding economic performance in 2019, best in Asia again, with robust corporate earnings as a result,” he said.
Galliano also said that while there were bumps in the economy this year, he expects the Cambodian corporate sector to recover remarkably.
“FDI is slightly lower year on year, but still very healthy. The construction industry may slow marginally, but with big infrastructure projects on the table, a strong recovery is expected.”
He said that certain sectors will also see improved earnings compared with 2018.
Galliano added that he expects continued strong credit growth, an acceleration in retail sales.
“There will be continual broadening of home ownership and fintech [financial technology], banking and insurance to perform particularly well.”
He felt that there are positive signs despite the gloom about the potential EBA withdrawal by the EU,Cambodia fortunately was able to offset this as a beneficiary of the ongoing US and China trade dispute.
“Bilateral trade between the two countries [US-Cambodia] is up 27 per cent to $3 billion. The garment sector should be stable up to 2019, especially if the US continues to skirmish with China on trade,” Galliano said.
On the Cambodia Stock Market (CSX), he felt that there must be some major changes in the financial and capital markets for the local bourse to play a major role in the corporate sector.
“There will have to be a paradigm shift in financial and capital markets development for the CSX to become meaningful and take its relevant place in the economic infrastructure of the Kingdom. With just five listed stocks, trading volume typically of 3K [thousand] to 20K shares a day, and a barely moving index, the CSX remains inconsequential.”
He said that while the government is providing impetus and incentives for companies to list on the CSX, there must be tighter enforcement on taxation.
“The government has been promoting listing incentives, especially for SMEs (small medium industries). But the real catalyst for driving listing will be stricter tax enforcement on large and medium corporates by the General Department of Taxation,” said Galliano.
“There must also be improving transparency and corporate governance. The National Bank of Cambodia [NBC] should also encourage development of debt markets, particularly a functioning inter-bank market and government and corporate bond market.”
This, he said, would lessen the reliance on the bank market where capital remains expensive, and elusive for small businesses.
Galliano sees the future engine of the Cambodian economy in SMEs. He felt that “entrepreneurship is in the Khmer DNA” and Cambodians will provide a strong impetus to the Kingdom’s growth this year.
“The Khmer people will continue to contribute to the economic development of the Kingdom with increasing domestic business ownership growth.
“Small and medium Khmer owned enterprises will be the future of the Cambodian economy and I expect this sector to blossom over the next decade,” said Galliano.