More companies to list bonds on CSX this year
More companies to list bonds on CSX this year
The Cambodia Securities Exchange (CSX) is all set to see more companies listing their bonds than their equities this year and this could be because bonds are proving to be a viable source of alternative funding, as per a recent report of the National Bank of Cambodia.
Currently, there are 23 listed companies on CSX, with 11 offering their equity shares and 12 offering their bonds. But it’s the bond market that’s set to see a boost more than equities in 2024. As many as five companies are likely to list their corporate bonds on CSX – which would take the total number of listed bond players to 17 versus 11 equity players.
The NBC in its report said that bonds are being tapped into by both the public and private sectors. For instance, bonds have proved so popular that Royal Group’s subsidiary Telcotech Ltd, a provider of fibre optics infrastructure and submarine networks, listed its second $20 million bond on CSX in January 2024. Earlier this year, the Royal Government of Cambodia raised $58.26 million in funds through government bond issuance in 2023 and plans to raise another KHR 440 billion or $108 million in 2024.
“The bond market has continued to provide an alternative source of financing in local currency for both the public and private sectors,” said NBC in a recent report.
“In light of the escalating bank loan rates, which are currently at their peak, we anticipate a significant uptick in bond issuances on the Cambodia Securities Exchange (CSX) from 2024 onwards.
Companies are increasingly viewing bonds as a viable alternative to traditional bank loans for securing necessary funding,” said Tan Khee Meng, Managing Partner of Baker Tilly (Cambodia).
“Moreover, firms approved by CSX to issue bonds stand to gain not only from lower borrowing costs but also from attractive tax incentives provided under the government’s stimulus programme for newly listed companies. These benefits make bond issuance an increasingly appealing option for corporate financing in Cambodia,” added Meng.
The NBC also noted that after a spate of bond issuance between September 2022 to December 2023, the first bonds matured towards the tail end of 2023. The months of September, November and December 2023 all saw bonds maturing.
The NBC report also said that the total corporate bond outstanding in the country was 518.2 billion riels ($126.9 million) in 2023. Of this , the bonds of Royal Railways formed 27.1 percent, Telcotech 23.6 percent, RMA (Cambodia) Plc 16.1 percent, CamGSM Co. Ltd (Cellcard) 16 percent and CIA First International School 16 percent.
Bond market entry in Cambodia requires a steep guaranteed fee. Something that can be coughed up easier by large corporates than mid-cap firms or SMEs. So Cambodia’s current bond market has seen good interest from institutional investors, who prefer to invest in well-established names.
Given the number of fresh IPOs lined up for 2024, there are two reasons the bond market might currently be proving more attractive than the equities market. One is the current regulatory framework – the eligibility criteria for companies hoping to list in the equities market – is more strict than for the bond market. Secondly, bonds are traditionally viewed as more stable than stocks – they might provide lower long-term returns compared to equities. But the investor gets his coupon rate and the listed-bond company requires financing.
Stocks might offer an opportunity for higher long-term returns compared with bonds but come with greater risk. And this could be playing on the minds of investors, said industry experts. Also, the performance of CSX’s equities market in recent times has been less than desirable.
As per the same NBC report, average trading volumes on CSX declined in 2023, after hitting peak trading volumes in 2021. For the first quarter of 2024, trading volume on the exchange was down by 34 percent and trading value by 57 percent, as per data on the CSX website.
The CSX has set itself an average daily trade volume of $100 million in 2030. CSX in a statement last month said, listed companies have raised as much as $379 million from the market with an average daily trading value of around $210,000. CSX has been holding workshops in recent months to create more awareness and educate investors on the potential of Cambodia’s stock market.
Apart from government efforts to boost trading on CSX, companies like Baker Tilly (Cambodia) and Cana Securities are also trying to expand the equities IPO pipeline with small and medium enterprises (SMEs). “We have identified some 10 potential IPO debutants from our end. And we hope to have a pipeline in place, where we identify potential candidates, train them and hopefully make successful debuts in the next few years,” said Baker Tilly’s Meng.
This is because SMEs form 98 percent of all businesses in Cambodia and contribute about 58 percent of the kingdom’s GDP. We view this as an opportunity and hope to identify more SMEs that can make successful IPO debuts, said Thai Nha, CEO of Cana Securities.
