Cambodia Investment Review
The Rating Agency of Cambodia (RAC) has taken a significant step in its journey to enhance Cambodia’s financial infrastructure by becoming a member of the Association of Credit Rating Agencies in Asia (ACRAA). The decision was approved by the ACRAA Board and signifies the international recognition of RAC’s diligent efforts to uphold credit rating best practices.
Read more: Regulator grants first bond rating license for Cambodia’s securities market
The ACRAA, established in 2001 in Manila, Philippines, and nurtured by the Asian Development Bank, fosters cooperation among domestic credit rating agencies. With the objective of promoting the adoption of best practices and common standards across Asia, ACRAA supports the development of the region’s capital markets and encourages cross-border investment. Now boasting 28 members from 13 countries, ACRAA will provide RAC with an ideal platform to exchange information, experiences, and skills, further enhancing its credit rating services.
A significant milestone for RAC
Mr. Chakara Sisowath, Managing Partner of 3E:Fii Capital and Executive Director of RAC, expressed his optimism when speaking with Cambodia Investment Review. He affirmed, “This is a significant milestone for RAC. We worked very hard to put in place a credit rating process that brings global best practices to Cambodia while taking into account the local environment and corporate structures. While there is still a lot of work ahead, being admitted to the ACRAA is a very encouraging step. It is a form of recognition of our efforts.”
Mr. Sisowath also highlighted the broader implications of this membership for Asian corporates. He said, “Implementing common standards across the region will make cross-border comparisons more meaningful. This will contribute to better risk assessment and investment decisions, and ultimately, result in a lower cost of funding for Asian corporates.”
Launched in 2022, the Securities Exchange Regulator of Cambodia (SERC) authorized RAC, a joint venture between the locally owned conglomerate Royal Group and 3E:Fii Capital, to provide the first licensed credit rating services. This marks a significant milestone in the development of capital markets in Cambodia.
Receive a country-specific credit rating
Credit ratings, symbolized by code designations such as AAA, BB, and CC, represent the creditworthiness of corporate or government bonds. Higher-rated bonds typically attract lower interest rates, as they signify lower risk to investors.
Read more: Cambodia implements its own ‘kh’ credit rating index
With this newly granted license, Cambodian companies can now receive a country-specific credit rating from RAC, such as ‘khAAA’ or ‘khBB’. These ratings will be a prerequisite for all listings on Cambodia’s Securities Exchange.
At present, Moody’s credit rating agency assigns Cambodia a sovereign rating of B2, which equates to non-investment-grade or high-yield bonds. To add depth to the rating system for firms operating in Cambodia, the regulator will introduce a dual ‘Khmer’ and ‘Global’ rating structure. Under the local category, Cambodia’s sovereign rating will be set at AAA.
This development paves the way for a more nuanced and comprehensive understanding of the risk associated with Cambodian firms, which could fuel the further growth of the country’s capital markets.
