'Cambodia Stock Exchange - Identifying Key Bottlenecks' report, has been developed by UNCDF within the framework of the UN SDG Funded Project “Integrated National Financing Framework (INFF) to Catalyse Blended Finance for Transformative CSDG Achievement”.

The project brings together UNDP and UNCDF to support the Royal Government of Cambodia to develop their Integrated National Financing Framework (INFF) that will be used to support the countries CSDG commitments. INFFs provide a framework for financing national sustainable development priorities and the SDGs at the country level.

This report, as the initial phase of a deep-dive study related to capital markets and debt financing, it identifies critical bottlenecks that is restricting expansion of the Cambodian Securities Exchange (CSX).

The work adds to the large body of work undertaken in the sphere of development financing undertaken the the RGC, the IFIs, Development Partners and the external finance sector and rating agencies.

This research report is 1 of a 2-part series conducted to assess performance of the Cambodia Securities Exchange (CSX) then suggest possible policy actions to improve such performance. In this report, we review CSX’s performance in terms of market capitalisation, listing/issuer, trading activities, investor composition, clearing and settlement, product offering, regulations and corporate governance, credit ratings, and services to market participants We then move on to identify key bottlenecks of CSX. In the subsequent report, we plan to recommend (1) key deliverable policy actions and (2) a roadmap to accelerate the development of CSX in partnership with Cambodia’s Ministry of Economy and Finance (MEF) and the National Bank of Cambodia (NBC).

We believe the key performance bottleneck of CSX lie in
the following:

1. Limited awareness & understanding of investments
2. A lack of a professional help
3. A lack of liquidity
4. Low stock return
5. High underwriting fees
6. Lagging institution framework compared to peers
7. Cambodia’s sovereign credit rating
8. No government bonds
9. A lack of listed USD-denominated securities
10. A lack of Cambodia-focused credit rating agencies
11. A lack of medium term note issuance program
12. Tax incentive ineffectiveness.

Among the bottlenecks #1 and #2 are issues that CSX can address with additional budget. Bottlenecks #3 and #4 are as a result of a lack of domestic trading interests on CSX in the first instance. Bottleneck #5 stems from a lack of competition in the underwriting business and a lack of credit rating agencies that are active in the Cambodian market and which have yet to established offices. For bottlenecks #6 and #7 these are common among Cambodia’s peers and we believe the improvement can only be attained on a gradual basis as the Cambodian market matures.

Finally we suggest that a government bond issuance program will provide a necessary boost, providing a signal of confidence that will increase bond trading activities on CSX, eventually resolving bottleneck #8. The remaining bottlenecks are what we believe CSX will need to address by putting into place policy actions to address in the near term.

To learn more, read full report HERE.