The Securities Exchange Regulator of Cambodia (SERC) has granted the Rating Agency of (Cambodia) Plc. (RAC) the first licensed credit rating services for Cambodia’s developing securities market.
RAC is a joint venture between the locally owned conglomerate Royal Group and 3E:Fii Capital, a member of 3E:Fii Group and marks an important milestone for the development of capital markets in Cambodia.
Bond ratings represents the credit worthiness of corporate or government bonds and are used by investors to assess the likelihood the debt will be repaid.
Agencies publish code designations (such as AAA, BB, CC) to express their assessment of the risk quality of a bond, typically the higher a bond’s rating, the lower the interest rate it will carry.
Improving information for investors
Speaking to Cambodia Investment Review, Managing Partner of 3E:Fii Capital and Executive Director of RAC, Mr. Chakara Sisowath explained bond ratings will enhance the liquidity and depth of Cambodia’s developing bond market.
“By improving the quality of available information, ratings will increase the participation of investors as they will have more choices to achieve their investment objectives,” he said.
“Having recognized ratings will also encourage companies to issue more bonds which will enable them to diversify their sources of funding, thus accelerating investment and employment to the benefit of the Cambodian economy,” he added.
SERC Director General H.E. Sou Socheat told Cambodia Investment Review he believed the presence of an accredited credit rating agency will help to boost the development of Cambodia’s bond market even more effectively.
“This new credit agency will help to reduce the burden of the bond issuer to seek for the guarantor or place the guarantee through the rating mechanism,” he said.
Khmer ratings proposed
Cambodia currently has a sovereign rating of B2 set by Moody’s credit rating agency meaning all bonds and companies operating in the Kingdom have the same rating typically defined as not investment-grade or as high yield bonds.
To overcome this, the RAC has proposed implementing a dual “Khmer” and “Global” rating structure that can provide more depth ratings to institutions operating in the Kingdom by setting Cambodia’s sovereign rating at AAA under the local category.
In addition, the company plans to provide an institutional rating in different sectors, risk management solutions, investment analysis, financial research, and analysis.
Cambodia’s securities market celebrated its 10th anniversary this year with seven corporations listing bonds. In the exchange 2022 outlook, it forecast three additional bonds would list this year.