It Will Be the Riel, Not Dollar, on the Bourse

Cambodia’s planned stock exchange will list securities prices using the riel, the national currency, rather than the dollar, the government announced Friday, following months of deliberations.

The National Bank of Cam­bodia and an economist welcomed the decision, saying trading stocks in riel would help to increase use of the currency and thus give the Bank more room for monetary policy in the long term. A financial expert, however, said the move was likely to limit the volume of trades, as foreign investors preferred dollar transactions.

The Securities and Exchange Commission of Cambodia said in a statement released Friday that quotations of stock prices at the Cambodian Securities Exchange, or CSX, must be made in riel only.

The SECC said that although securities should be issued and traded in riel, it would allow for payments to be settled in dollars for the first three years after the bourse’s launch, if involved parties agreed to settle in US currency.

The commission said it would still need to define the details of stock market procedure for operating the bourse in riel. Hong Sok Hour, CEO of the CSX, said yesterday that some important de­tails had yet to be discussed be­tween SECC and the CSX.

“Everything is not decided yet,” he said, adding that he was confident the CSX would open as planned in July.

Ngoun Sokha, director general and spokeswoman for the NBC, said the central bank supported using only riel at the CSX, as it would increase use of the currency in Cambodia’s still highly dollarized economy.

This SECC decision, she said, would give the Bank more monetary controls to influence the national economy, such as setting interest rates and controlling the volume of money in the economy.

Finance Ministry officials have previously supported operating the CSX in dollars because the majority of investments and funds here are already denominated in US currency.

Ms Sokha said the choice of currency was “not a critical factor in the success of the stock ex­change,” explaining that factors such as political stability and a sound regulatory framework were more important for investors.

But Leong Yeng Kit, director at OSK Indochina Bank Ltd, said it was likely that listing stocks in riel would have a detrimental effect on the growth of investment in the stock market.

“We definitely foresee a drop in [potential] trade, especially from for­eign investors,” he said. “They are looking for profits and want to be able to move money around.”

Jean-Daniel Gardere, former head of the French Embassy’s economic mission, said that he thought the SECC’s move was “probably the best possible decision in the Cambodian context,” as it would initially allow investments to be conducted in dollars, while inviting traders and in­vestors to pay in riel.

Mr Gardere said that it was important that the NBC could further expand its role in Cam­bodia’s economy as use of the riel increases.

He also said slower growth of the stock exchange was not necessarily a bad thing.

“It’s important to move cautiously. If [the CSX] is smaller, it will also be healthier and better controlled,” he said, as operating the bourse in riel would prevent some foreign investors from bringing in large amounts of funds to speculate and disrupt Cam­bodia’s relatively small stock exchange and capital market.

According to the Finance Min­istry, at least 10 private sector companies are currently interested in listing on the bourse, while three state-owned enterprises are being readied to issue shares.

(Additional reporting by Van Roeun)

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