The year of the Covid-19 pandemic has passed, and many countries’ economic activities have been severely hit, and Cambodia is no exception.
However, due to the setbacks of the overall environment, the Cambodian financial market has sprung up and delivered a beautiful report card.
Despite the epidemic, the stock market will perform well in 2020
After 2020, with Covid-19 as the representative word, many industries around the world, such as tourism, aviation, etc., have been hit hard. Cambodia’s economy can’t escape its fate. The economic performance in 2020 will plunge, and the economic growth rate will go from 7% in the past to negative growth in 2020. Even if all industries are affected, the Cambodian stock market is active. According to a report from the Cambodia Stock Exchange, the daily turnover of the stock market in the first quarter of this year was 9 times that of last year, a year-on-year growth of 808.05%. The total market value of the stock market has grown from approximately US$537 million in Q1 last year to approximately US$2.39 billion this year, an increase of 345%. The enthusiasm of the Cambodian stock market stands out in a bleak environment.
Cambodian stock trading performance (Source: Cambodian Stock Exchange)
The financial market that is about to take off
Cambodia’s financial market is still in its early stages of development. The country’s only stock exchange, the Cambodia Securities Exchange, was founded in 2010. Cambodia’s financial market is underdeveloped, and the stock market has little performance. Even with the rapid economic development in recent years, the number of listed companies has not kept up with the pace of economic growth. There were only 5 listed companies at the end of 2019, and it was 2 years ago that the last company went public. In 2020, Covid-19 has become a representative word, but it is also a milestone in the Cambodian stock market.
There will be two companies going public in 2020, the most representative of which is Acleda Bank, the largest commercial bank in Cambodia. The total market value of its stock is four times the sum of the other five listed companies. The other is Pestech (Cambodia) Plc, a power transmission company. This year, three companies are expected to go public. The DBD engineering company that will be listed in the near future is also the first company to be listed on the growth board. Xigang Special Economic Zone is also preparing for listing. In addition to listing, there is also a corporate bond market. As of 2019, only 4 corporate bonds have been issued on the Cambodia Stock Exchange. In 2020 alone, there will be 4 corporate bonds listed. This year, three companies are also expected to issue corporate bonds. The activeness of the Cambodian Stock Exchange’s stock market and corporate bond market heralded the upcoming take-off period of the country’s financial market.
More diversified financial instruments available to enterprises
In the past, most companies could only borrow from banks to raise funds. The listing of stocks or the issuance of corporate bonds are another channel for companies to raise funds. Compared with bank loans, listings and corporate bonds make companies more flexible in repayment, interest or dividend payments, and can allocate funds according to the needs of the organization to help the company develop with more effective financial management. The diversification of financial tools helps companies obtain funds in the most efficient way and focus on company development. The strong development of enterprises stimulates economic growth. In addition, the more active the Cambodian Stock Exchange is, the easier it is to attract the attention of international investors, find high-quality investment targets, and drive foreign capital into Cambodia.
Cambodia’s financial market, the next key point investors should pay attention to
The booming financial market has a positive cyclical impact on the country’s economy. In addition, as the global supply chain shifts to Southeast Asia, Cambodia has leapt into the eyes of international companies and investors. The dollar-denominated and free and open economic policies have driven companies to move to Cambodia, and have also promoted the vitality of the financial market. Next will be the first take-off of the Cambodian financial market, which may be another business opportunity.