Since launching in 2011, the Cambodia Securities Exchange (CSX) has attracted just five companies; three state-owned enterprises – Phnom Penh Water Supply Authority, Phnom Penh Autonomous Port and Sihanoukville Autonomous Port – as well as two private-owned – Phnom Penh Special Economic Zone and Grand Twins International.
Khmer Times’ May Kunmakara, sits down with Jong Weon Ha, vice-chairman and CEO of CSX, to talk about the Cambodian stock exchange and its future, including their strategy to attract more companies to the bourse.
KT: Tell me about the evolution of CSX since its launch.
Mr Ha: As you know, after seven years of operation, we have five companies listed. Our daily trading volume in 2017 was 15,000 shares per day.
We also established the Growth Board for Small and Medium Enterprises (SME) in 2015, and introduced a bond market late last year. Our efforts have borne fruit: we have one more candidate for listing in the main board, one in the Growth Board and a few interested in issuing bonds.
KT: What is keeping companies from listing in the bourse?
Mr Ha: I joined CSX less than two months ago, so there is still a lot I don’t know. However, after reading all reports, news and statistics on CSX and meeting with representatives of member companies, candidates, regulators and officials, I’ve come to the conclusion that there are two main challenges: lack of awareness and difficulty meeting CSX’s listing criteria.
First, many companies don’t really understand the importance of raising money by listing in the securities market. This is exacerbated by the fact that CSX’s power to raise awareness has been quite limited in the past.
There are also those who want to join the bourse, but haven’t been able to because they are unable to meet CSX’s listing criteria. They often need more time to have their financial results audited, improve their corporate governance, etc. Before joining, it is prerequisite that they are in full compliance with the country’s tax regime and laws, which is also an issue for many companies.
KT: What are some of the most recent initiatives you’ve launched to promote the market?
Mr Ha: To attract more companies to the bourse, we have started a campaign called ‘Incubator Program’. Through this initiative, we meet with companies interested in listing – regardless of size – and provide free consultation services. We have also conducted a series of seminars to guide companies in the process of becoming a publicly-listed enterprise.
The most important programme we are working on right now is the Excellent Program. CSX, together with the Securities and Exchange Commission of Cambodia (SECC), as well as a number of securities, accounting, and legal firms are working together to provide advice to companies that want to join the bourse. The companies that go through this programme are given special incentives to list in CSX. We expect several companies to join CSX after having completed this programme.
In terms of attracting more trading activity, CSX has been focusing on educating investors and the wider public with monthly open training sessions, as well as trainings to university students in cities and rural areas. Once a year, we also hold a Stock Exhibition. We are also continually working on streamlining our trading processes and operations.
KT: The trading volume at CSX is still really small. How are you tackling this issue?
Mr Ha: We need more companies to join us, particularly those that present attractive opportunities for speculation. This will attract more investors, which will eventually create more liquidity by buying and selling shares. With more liquidity, more companies will be attracted to the bourse. It is a chicken and egg situation, really.
KT: 90 percent of SMEs in Cambodia doesn’t keep proper financial records, which is obviously an impediment for joining the Growth Board. What has CSX been doing to improve companies’ accounting standards?
Mr Ha: I worked in the Korea Exchange (KRX) for 25 years. In 2014, I was tasked with expanding a newly-established SME board in KRX called ‘KOSDAQ’, which is similar to New York Stock Exchange’s NASDAQ. When I started, there were only 20 companies listed in KOSDAQ. Four years later, more than 100 companies were joining the board every year.
The situation in Korea back then is the same situation we find in Cambodia now. Those companies in Korean didn’t follow proper accounting standards. They didn’t know how important they are. They didn’t know raising capital through the Exchange could help them grow fast. Even if they knew, they didn’t know how to actually list on the bourse. We met with them, guided and advised them, and finally many of them decided to join. Once they were willing to list, they agreed they needed to improve their accounting standards, which we help them do.
