PPWSA up 48 per cent on first day

Economy and Finance Minister Keat Chhon (centre) rings a bell to mark the end of the first trading session at Cambodia's bourse. Photo by Hong Menea

By Don Weinland
Thursday, 19 April 2012
Phnom Penh Post

By the time Deputy Prime Minister Keat Chhon closed the first session of the Cambodian Securities Exchange yesterday morning, shares in Phnom Penh Water Supply Authority (PPWSA), the Kingdom’s first domestically listed company, were just shy of soaring 50 per cent.

PPWSA closed up 48 per cent at 9,300 riel (US$2.33) from an opening price of 6,300 riel.

A mix of institutional and retail investors traded 487,110 stocks worth $1.13 million.

The sharp increase was expected in the newly launched market.

With primary market bids 17 times higher than share supply, experts had predicted the stock would hit that mark after Prime Minister Hun Sen opened the exchange at the auspicious time of 9:09am from his office, a block west of the CSX.

The premier’s image was broadcast before a flock of Cambodian and Korean officials and businesspeople as he rang in the country’s first, and long-delayed, trading session.

“It’s not surprising to see the price climb so high. It’s the first listed shares in a developing country. But that’s not to say there’s no risk of overheating,” Yoo Jae-hoon, the standing commissioner of Korea’s Financial Services Commission, told the Post on the sidelines of the historic launch.

Balance was the key word of advice to CSX regulators yesterday, who hope to see two more state-owned companies, Telecom Cambodia and Sihanoukville Autonomous Port, list by the end of this year.

The Securities and Exchange Commission of Cambodia (SECC) will have its hands full courting potential listing companies and nurturing stable trading, while also staving off speculation that would prompt the same boom-and-bust that has been experienced in other regional markets such as Laos and Vietnam.

“The challenge for any emerging frontier market is finding the right balance between retail and institutional investors,” Adrian Cundy, director and head researcher at Vina Securities, said by phone yesterday from Ho Chi Minh City.

Investor herd mentality could heat up the market and lead to a bubble like the one experienced in Vietnam in 2006 and 2007, he said.

Good companies that grow earnings, better corporate governance, liquidity and easy repatriation of capital would attract institutional investors who were looking for longer-term returns, but immature markets such as Cambodia’s would not quickly be included in institutional investor benchmark indices, Cundy said.

The SECC had to educate investors on the dangers of speculative practices, such as taking loans for investing purposes, if the Kingdom was to avoid a quick rise and fall, Yoo Jae-hoon, of Korea’s Financial Service Commission, said.

“Without that, there could be too much euphoria from the investor side. In the early stages of the CSX, there could be an over-demand for shares and hyper prices,” he said.

CSX chief executive Hong Sok Hour said speculation would be watched carefully and SECC regulation should help reduce risks.

Although the share price was allowed to increase 50 per cent yesterday, daily increases and decreases will be capped at 5 per cent starting today.

“Speculation has been taken into account. It will be there, but only to a certain extent,” Hong Sok Hour said on the sidelines of the launch.

The market would need the increasing liquidity brought by more listed companies, as well as the potential issuing of more shares from PPWSA, Yoo Jae-hoon said.

Samsung and Hyundai, Korea’s two biggest conglomerates, had been reticent to list when the Korea Exchange opened some 40 years ago, he said. It was well-conceived tax and financial incentives that had brought the companies on board.

“It’s not that Cambodian companies don’t want to list, it’s just that they’re simply not ready yet,” Cambodian Public Bank country head Phan Ying Tong said yesterday.

Several public and private companies were interested in listing, but SECC regulations – in particular, the three-year tax record requirement – would prevent them doing so at the present time, Phan Ying Tong said.

“They need to put their houses in order,” he said.

This year should bring initial public offerings from two more state firms, Phan Ying Tong predicted. Private companies should be on the CSX next year, he said.
To contact the reporter on this story: Don Weinland at don.weinland@phnompenhpost.com