If you were given all the money in the world to invest in a
stock from the stock exchanges of Laos and Cambodia, which stock would
you choose? You might not actually get a lot of choices - both exchanges
are stagnant two years after becoming operational, due to domestic
companies being unwilling to reveal financial information, unfavorable
rules and regulations, and limited understanding by potential investors.
The Lao Securities Exchange (LSX) has two companies listed currently,
which is double that of the Cambodia Securities Exchange (CSX).
On an average day, the combined trading turnover from the three
companies listed in these two exchanges might reach a total of 5 million
Thai baht ($160,760), a few minutes’ activity on the Stock Exchange of
Thailand (SET), where average daily turnover this year has been 60
billion baht, Bangkok Post, a Thai newspaper, reported.
LSX was launched in January 2011 with help from both the SET and the
Korea Exchange of South Korea (KRX). KRX holds a 49 percent stake in the
LSX operating company – as well as 4 percent of the CSX.
LSX has a slight edge over CSX with its two listed companies – EDL
Generation Plc and Banque pour le Commerce Exterieur Lao. Both began
trading when the market opened 26 months ago.
CSX, on the other hand, had to wait until April 2012, nine months
after it opened in July 2011, for Phnom Penh Water Supply, its only
listed company, to begin trading.
The Cambodian government is pressing two other state-linked
businesses – Telecom Cambodia and Sihanoukville Autonomous Port – to
hold their IPOs. Several deadlines have come and gone without anything
happen, however.
The same barriers are deterring both exchanges from becoming more
successful. In addition to the small number of listed companies, the
rules and regulations of both are unfavorable – in particular, they
discourage foreign investment.
“We’re in the process of allowing foreign investors to hold more
shares in the listed companies. The ceiling for foreign investors in
listed companies currently is 5 percent. We will hike it to 10 percent
by the end of this year,” said Park Ho-jeong, vice-chairman and chief
operating officer of the LSX, according to Bangkok Post.
Park said foreign investors were looking to invest more in the Lao
stock market. In addition to doubling the ceiling for foreign
shareholding, the LSX also is trying to introduce new products to the
market despite a number of difficulties.
Laos has set ambitious goals for its exchange in the face of
setbacks. LSX plans to have 10 listed companies by 2016, which means it
needs to attract eight more companies. It also hopes to reach the
break-even point within five years.
Currently, daily trading volume is around 80,000 shares; if this
figure hits 1 million, LSX is confident the market can break even, Park
added.
LSX wants to encourage potential companies by educating them on the
important role the capital market can play in their business planning
and fundraising. It has dealt with 50 companies that have the potential
to be listed, including Lao Airlines.
Changing the mindset of company owners is still the biggest hurdle to
be overcome. These leaders need to understand the mechanism of the
stock market, as well as the need for compliance and transparency in
trading.
“Company owners don’t understand why they have to reveal their
financial statements to the public. We have to change their mindset,
which is not easy. We have been trying to hold lots of conferences or
seminars to educate them about this,” Park said.
LSX is targeting domestic companies in agriculture, real estate and
construction. Eventually, it plans to attract foreign companies or joint
ventures.
CSX faces similar challenges. The capital market being new to
Cambodia, most companies don’t understand the process of raising funds
through the market.
Kao Thach, the deputy director-general of the Securities and Exchange
Commission of Cambodia, said the country should incorporate a program
about the stock market into education, so young people as well as
investors can have more understanding about how the market works.
Cambodia has more potential companies than Laos, as it has more manufacturing activities and a more active real estate business.
However, Thach believes CSX should focus on manufacturing and service
sectors, but not real estate, due to heavy speculation in the real
estate market.
“The property companies in Cambodia currently are not good enough for our economy,” Thach said, according to the Bangkok Post.
“They can’t create jobs for our people. What those companies do is buy
and sell land for profit and speculate on the market prices. So, I don’t
think that real estate can support our stock market.”
1 comment:
It's not right to say foreigners are restricted to invest on CSX. We don't have any limitation on stock holding for foreigners. Even the general investment, we don't have any limitation on foreign ownership in their company or project.
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