The Securities Exchange Regulator of Cambodia has awarded the first-ever custodian banking license to Acleda Bank allowing the bank to hold assets for investors in the Cambodia Securities Exchange.
Custodian banks act as specialized financial institutions responsible for safeguarding an individual’s or firm’s assets, such as stocks or bonds, and administering actions related to the transfer or management of these assets.
The facility is often used by institutional investors, sovereign wealth funds, high-net-worth investors and retail investors and can ensure proper regulatory checks such as anti-money laundering and combating the finance of terrorism requirements are met without much burden on the client.
Acleda is a bank for the people
Speaking at the launch event Acleda Bank Chairman Dr. In Channy said that Acleda is a bank for Cambodia and the people adding this was another example of the financial institution assisting in Cambodia’s economic development.
“Acleda is the people’s bank and with our newly acquired custodian banking license we are ready to assist any institutional investors that need to use our service to invest in the local stock market,” Channy said.
SERC Director-General H.E. Sou Socheat explained that while Acleda Bank was the first and currently only licensed custodian other financial institutions were welcome to apply.
“While there is not currently a big market for custodian banks in Cambodia – as the securities continue to develop with government bonds also planned for this year – we expect the need to increase,” he said.
The Cambodian government recently announced changing taxation incentives for listing companies that include a 50% reduction on the income tax for firms that issue debt in the amount of more than 20% of total assets and for stocks, firms will get 50% reduction on income tax if they list their share more than 20% of voting share.
To read more about the tax benefits of listing on CSX click here.
CSX Chief Executive Officer said Cambodia’s securities exchange was taking steps in the right direction and continues to grow both in terms of market size and daily transaction volumes every year.
“This year marks our 10th year of operations and every year we continue to grow and develop. Of course, we would like to move some things a bit faster but coming out of the COVID pandemic we are in a strong position,” he said.
Investors traded a record $27.4 million inequities on Cambodia’s Securities Exchange for the first quarter of 2022, increasing 221% from $8.5 million in the same period of 2021.
According to official CSX quarterly statistics, 97% of trade was from local investors and 91% were individuals with Acleda Bank bar far the most traded stock with over $22.03 million a 1231% year-on-year increase.
To read more about the Q1’22 CSX review click here.
Attracting more institutional investors
Han Kyung Tae from brokerage house Yuanta told Cambodia Investment Review that Custodian banks and their services are an essential part of the capital market infrastructure and it serves as a link connecting the local markets to the international investing communities, in particular large overseas institutional investors.
“The importance of custody services is directly related to the impotence of foreign portfolio investments (FPI) into the local capital markets, and the importance of FPI has proved as important as foreign direct investments for the country’s economy and the positive interaction between the two is an additional benefit.” he said.
“I am so happy to hear that ACLEDA becomes the first local custodian bank and hope it will bring about meaningful changes to the local capital market and the country’s economy,” he added.
In addition, to custodian bank facilities improving fundamentals such as liquidity levels, the number of stocks listed and international trust in Khmer riels are also considered key to attracting more institutional investors to the market.
There are currently nine stocks listed on the CSX, seven on the mainboard and two on the growth board with a combined market capitalization of around $2.1 billion.