Cambodia Investment Review

CSX forecasts record growth for Cambodia’s capital markets in 2023

CSX forecasts record growth for Cambodia’s capital markets in 2023

Harrison White

Cambodia Securities Exchange (CSX) has outlined record growth for the exchange in 2023 forecasting 14 new firms to list, doubling its daily trading volumes and tripling the number of registered trading accounts, according to its latest annual outlook.

First launched in 2011 – CSX has been tasked with raising public awareness and promoting the study of investment opportunities in Cambodia’s underdeveloped capital markets. In addition, it aims to strengthen transparency, confidence, and predictability, which are essential in allowing Cambodia’s economy to move forward and develop sustainably.

CSX has made significant progress in the past, such as the establishment of the CSX Trade App mobile trading application, the online trading account opening system, and the modernization of the Phsar Hun App to teach investors.

CSX reflects on its 2022 achievements

Reflecting on the previous year CSX commented 2022 was a major year for the exchange achieving a total of seven listings, a 2.5-time increase over 2021 data which was only two.

The new listed securities in 2022 included one Growth Board stock designated “CSX JSL”, three corporate bonds listings from Royal Railway, and three government bonds listings from the Ministry of Economy and Finance marking the first-ever profile listing of Government Bonds in Cambodia.

Read more: CSX releases its 2022 strategic outlook

CSX Director Kim Sophanita reflected the exchange was tipped to receive more listings last year but was impacted due to the surge of inflation and interest rate and the global equity market downward making many potential issuers suspend their plan.

“If market conditions were better, we would have gotten more equity and corporate bonds than that but added it was positive the government bonds are now being developed,” she added.

Kim Sophanita, Director at Cambodia Securities Exchange.

Key figures from 2022 were:

  • Capital raised in 2022 reached $54.24 million marking a 133% hike compared to 2021, for which the majority of total raised capital was from bond issuance (63%) from corporate bonds and (32%) from government bonds.
  • Despite the slight decrease in average trading volume in 2022, the average trading value had doubled in value, reaching over $488,712 per day – making CSX break another record-high and double its trading value for two consecutive years.
  • Additionally, there were a total of over 5,000 new trading accounts registered in 2022, overtaking that of last year by about 31%.
  • Following a stream of decline, CSX Index slightly recovered around 2% in 2022 compared to 2021 while the total Market Capitalization saw an increase from $1.75 billion to $1.83 billion.

Cambodia’s macroeconomic outlook for 2023

Looking at recent trends, CSX believes that domestic credit growth remains strong and the exchange rate is stable while domestic revenue growth has now fully recovered. Back to the securities market, there is a new stronger wave of interest from conglomerates, new-generation entrepreneurs, and local investors both individuals and institutions.

It added that digitalization has been enabling easier access to and more inclusive capital markets. The government bond market has been emerging as well as tax incentives for securities market participants remain intact and new initiatives on promoting liquidity and new product development have been well laid out.

Read more: Government to offer more tax concessions for CSX

“The stock market sell-off has left some stocks with strong earnings potential trading at very low valuations. Given the traction and momentum, we ambitiously set a high target for 2023 by doubling the daily trading value to $1 million, doubling the number of new listed securities to 14, and tripling the number of newly registered trading accounts in a year,” the CSX stated.

“CSX believes that the capital market growth will speed up significantly and that the targets we have set for ourselves are feasible in the coming year if the market gets committed support from all the market participants and relevant governmental and private parties,” it added.

Stephen Higgins at the AmCham Capital Markets keynote in Phnom Penh.

Stephen Higgins from the financial advisory firm Mekong Strategic Capital commented that given the tightening liquidity in the bank sector, and increasing borrowing costs, listing on CSX will start to look more attractive for firms looking to raise capital

“There’s a saying that “liquidity begets liquidity”, and we started to see higher liquidity in the market in the market in 2022 which should encourage even more liquidity in 2023” he added.

CSX launches 2023 strategic plan 

To achieve the exchange’s ambitions, CSX has made public its strategic plans for 2023 by focusing on four main pillars.

Liquidity. To promote liquidity, CSX plans the following:

  • Expand investor base via 1) improving necessary infrastructure and fulfilling preconditions for local and foreign investor entry 2) improving product scale, quality, and diversification 3) strengthening investor communities via public & private groups, events, and meetings that allow investors to meet, discuss, and share information 4) continue raising investor education and market awareness and 5) promoting research report publication.
  • Promote investments in financial assets by introducing savings for long-term investment concepts by targeting the young, the high net-worth individuals, and local institutions.
  • Introduce new operational facilities including Foreign Currency Settlement, Margin Trading, or cash borrowing for trading, and enabling bond traders to settle the deal at any date other than 2 days after.

Products. To improve the product line-up for investor’s diversification and risk appetite, CSX shall: 

  • Continue to promote the listing of existing equity and debt securities, especially ESG bonds, by promoting the concept of long-term and sustainable growth, wealth-sharing to Cambodian people, and wise exit strategy.
  • Introduce new products including Real Estate Investment Trusts (REIT), Cross-Border Products, and other kinds of Collective Investment Schemes (CIS) products.

Market Integrity. To strengthen market confidence CSX shall continue to promote investor protection through the following actions: 

  • Promote transparency by enhancing full and timely disclosures of listed companies and market data dissemination.
  • Promote a safe and fair-trading environment by strengthening daily market monitoring and ensuring secured IT infrastructure.
  • Digitalization. To boost overall productivity and efficiency of operations and transactions in the market, CSX is working to: Adopt digitalization to improve operational efficiency.
  • Foster innovation for the future by investing in local young talents and in-house capacity building.
Han Kyung Tae, Yuanta Securities Managing Director.

Reflecting on the exchange’s growth ambitions for 2023 – Han Kyung Tae, Managing Director of international brokerage firm Yuanta Securities said: “For the local capital market in Cambodia to continue to grow and develop, we must attract more foreign portfolio investment (FPI) into the country. Unfortunately, we have encountered challenges in convincing overseas investors to invest in our local markets.”

Read more: CSX says stock market is undervalued as over 2,000 new trading accounts opened during ‘My First Stock’ 2022 event

“As a result, it may be beneficial for us to explore alternative strategies, such as bringing Cambodian businesses to international markets to raise capital and increase their visibility among international investors. By doing so, not only will Cambodian businesses benefit from increased funding and exposure, but international investors will also gain a better understanding of the Cambodian market, thereby potentially increasing FPI in the future,” he added.

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