Trading Floor Silent Two Years After CSX Launch
By and | July 17, 2013

It is almost two years to the day since Cambodia’s stock market launched in Phnom Penh in front of proud government officials, senior financiers and eager investors from across the region.

Initial expectations were that a total of three state-owned firms would be listed within six months of the launch.

None made the deadline.

An electronic billboard outside the Cambodia Securities Exchange in Phnom Penh's Canadia Tower shows the unchanged share price of the Phnom Penh Water Supply Authority on Tuesday. Two years after the bourse was launched, the state-owned firm is still the only listed company. (Siv Channa)

An electronic billboard outside the Cambodia Securities Exchange in Phnom Penh’s Canadia Tower shows the unchanged share price of the Phnom Penh Water Supply Authority on Tuesday. Two years after the bourse was launched, the state-owned firm is still the only listed company. (Siv Channa)

The Cambodia Securities Exchange (CSX) first witnessed traders on its floor on April 18 last year, when Prime Minister Hun Sen rang the opening bell after the Phnom Penh Water Supply Authority (PPWSA) secured its listing on the exchange.

Now, the country’s bourse is virtually dormant.

During a visit to the CSX inside Phnom Penh’s Canadia Tower on Tuesday, you could hear a pin drop; the trading floor has been closed since December, and traders at securities firms are asked to trade shares inside their own offices in order to cut down on costs to the exchange.

“In the beginning, we just wanted to show the exchange to the Cambodian people, but it’s not necessary now,” CSX market operations deputy director Lamun Soleil said.

The trading floor with its computer terminals shut down in December due to high overheads, Mr. Soleil said.

“It may be permanent. It’s too costly for the security companies and the CSX as well.”

The CSX is 45 percent owned by Korea Exchange with the re­maining 55 percent owned by the government.

While the opening of the bourse in 2011 featured both the chairman of Vietnam’s Vina­Capital—a $1.8-billion investment fund based in Vietnam—and representatives of New York-based multinational Blackstone Group, the only sign of life at the CSX on Tuesday was a discarded black sweater hanging over the back of a chair.

“I don’t know how long, but it’s been there a very long time,” a receptionist said of the item of clothing.

“We left it there in case the person who owns it comes back for it,” she said.

Mr. Soleil said that any trading that occurs on the bourse is now taking place through two fiber-optic cables, which allowed securities firms and brokerages to trade shares from computers at their own offices.

“We use the trading hall only when there’s important events. When there’s an event, we require the securities firm representatives to come,” he said. “It’s just a place for the public and the media to come and see or to take photos.”

The only listed company on the CSX is the PPWSA, whose share price jumped about 64 percent in the first week of trading—from 6,300 riel to 10,300 riel. But the stock quickly fell and on Tuesday closed at the same price it originally opened at last year.

Securities firms have touted everything from a local restaurant chain to a Taiwanese garment factory as possible candidates to list. But nothing has yet materialized, and Telecom Cambodia, the state owned firm that operates landlines in the country, still has no end date in sight for making its long-awaited initial public offering (IPO).

Making matters worse for the CSX and the government, in February, Telecom Cambodia director-general Lao Saroeun left his post amid an investigation into corruption allegations. Hundreds of Telecom’s staff protested outside their offices claiming that millions of dollars had gone missing from the company’s accounts and called for Mr. Saroeun to be sacked.

Mr. Soleil said that Telecom Cambodia would not be listing any time soon.

“The company is not profitable, and that is a requirement for the listing,” he said. “It’s possible that a garment factory will finally list before the end of the year.”

“It is frustrating just having a single company [PPWSA]. Many companies have already prepared themselves, but it takes time to go public,” he added.

The only other public entity to announce its intention to list is the Sihanoukville Autonomous Port, another state-owned firm.

The port’s director-general, Lou Kimchan, said Tuesday that plans were ongoing to list on the exchange.

“We are preparing the documents [for an initial public offering] step-by-step, though we don’t know when we will list,” he said.

Suzuki Hiroshi, chief executive of the Business Research Institute for Cambodia, said the CSX’s tardiness in attracting more listings was partly due to the strict regulations in financial transparency and accounting that companies need to satisfy before listing.

He also said that the minimal amount of trading with the PPWSA stock has not helped to attract investors.

“If PPWSA shows very good performance, the stock price should go up. But at the moment, the stock price is very, very stable,” he said. “This is not so bad, but it’s not so good—many private companies are watching” and have been discouraged by what they see, he said.

Svay Hay, managing director for Acleda Securities, one of seven underwriters on the bourse, said that the decision to shut the trading floor was not necessarily a sign of bad times.

“This is an option…of each country, so it is no problem,” he said. “In some countries, trading happens at the stock market itself, while the rest do the trading at the securities companies.”

Han Kyung-tae, managing director for Tong Yang Securities, another underwriter, said his firm had been given approval to withdraw traders from the CSX in December.

“The last time we sent people there was December 24 or December 25, 2012,” he said. He also said his firm, which helped PPWSA achieve its listing last year, was currently helping several other firms prepare IPOs.

“I think the next one will come some time next year,” he said without elaborating.

Mr. Soleil said that while he hoped the bourse would list at least 10 companies by 2015, it might still be a long time before the trading floor is reopened.

“At first there were many people coming to see [the trading floor] because they were used to seeing the New York Stock Exchange,” he said. “But then they saw that they do not need to come.”

“We advise them not to come,” he said. “It’s not the U.S.”

Despite the empty chairs and the lack of activity at the CSX, the bourse and its currently unused trading floor will move from its current home at Canadia Tower to a French colonial-era building on Street 106, which is being renovated at a cost of $4 million.

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