Bridge over ocean
17 March 2021 Article

The Emerging Asia Pacific Capital Markets: Cambodia

  1. Chakara Sisowath, CFA
  2. Chan Thoeun Seng, CFA
  3. Varabott Ho

Although Cambodia’s economic liberalization began in the 1990s, the country’s first equity listing did not occur until 2012. The Cambodian government is implementing a variety of measures to accelerate capital market development.

The Cambodian capital markets have come a long way considering that the Paris Peace Agreements, which ended the nation’s civil war, were signed only in 1991. Strong GDP growth (10.8% annually between 2000 and 2018), a dollarized economy with free movement of capital, and a policy consensus favoring investments should have spurred the rapid development of a securities exchange in Cambodia. The first equity listing on the Cambodian Stock Exchange (CSX), however, did not take place until 2012.

Currently in Cambodia, seven companies are listed on the main board, and another six companies have issued eight bonds. The CSX is still small in size compared with its Asian neighbors’ bourses. Its development is also behind schedule given the urgent need of local corporations to find cheap and convenient sources of funding. Stocks and bonds on the CSX have had comparatively low returns historically when compared with less risky bank deposits or higher returns from real estate.

Mindful of these challenges, the Royal Government of Cambodia has implemented a broad range of measures to support faster capital market development. Educating both investors and corporations, introducing accounting standards and audit requirements, and licensing such market actors as fund management companies, securities brokers, and custodian banks, to name a few, will provide the infrastructure and support Cambodia needs for long-term growth.

Listing private companies with exciting growth prospects will be key in renewing interest among potential investors in Cambodia. Likewise, new investment choices such as REITs, private equity, and mutual funds should spur further interest. The creation of a government bond market will be critical as well in order to attract institutions that crave safe and long-dated assets for asset–liability management purposes.

All of these factors combine for a constructive view of the prospects for Cambodian capital markets.

This article is from "The Emerging Asia Pacific Capital Markets: Challenges and Opportunities," published by CFA Institute Research Foundation.

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