The bond market in Cambodia commenced operations following the approval of Prakas No. 009/17 on the Public Offering of Debt Securities, dated August 17, 2017.
In 2018, the International Finance Corporation (IFC), a member of the World Bank Group, supported the first-ever bond issuance in the Kingdom of Cambodia by investing $20 million in Cambodian microfinance institution Hattha Kaksekar Limited, which was issued in riel. The issuance, which took place on December 5, 2018, had a nominal value of 10 thousand riel per bond and raised 120 billion riel (approximately $30 million) from the market.
As of the fourth quarter of 2024, 12 companies were listed on the Cambodia Securities Exchange (CSX), including green bonds and sustainability bonds that are a source of pride for Cambodia. Although our market is still in its infancy and the market size remains small when compared to neighbouring countries like Thailand or Vietnam, its implementation and development are progressing in line with regional and global trends.
Why should you invest in the bond market in Cambodia?
I. Potential for market growth
As one of the fastest-growing economies in Southeast Asia, Cambodia offers a range of attractive investment opportunities – including in its bond market – with consistent GDP growth rates averaging 7% over the last decade. This growth has led to a greater need for better infrastructure, more business investment and more advanced financial markets, etc.
II. Higher potential coupon rate
Due to the bond market in Cambodia being in its infancy, it typically offers higher yields. In fact, HKL, the first company to issue a corporate bond in Cambodia, offered a coupon rate of 8.50% per annum (paid semi-annually). In contrast, corporate bonds in Thailand, an older market, generally offer coupon rates ranging between 3% to 6%, depending on maturity and risk investments.
III. Tax incentives
Tax incentives are a crucial strategy in the development of the securities sector in Cambodia.
Public investors shall gain a 50 per cent deduction of withholding tax on interest and/or dividends earned from holding and/or buying-selling government securities, stocks and bonds.
Advantages of investing in bonds for fixed-income investors
I. Coupon
The main advantage of bonds is that they provide a fixed, predictable income. The bondholder receives regular interest (coupon) and is repaid the principal amount when the bond reaches maturity, which typically ranges from 1 to 10 or 20 years.
For example: A company issues bonds with a nominal value of 10 thousand riel per bond, with a coupon rate of 8.5% per year. Therefore, bondholders will receive annual interest of 8,500 riel per bond, paid semi-annually.
II. Lower risk compared to stocks and more attractive than bank deposits
Stocks are generally riskier than bonds because they are traded daily, and their prices fluctuate based on factors such as company performance and market conditions. In contrast, bonds are considered a safer and lower-risk investment. Additionally, bondholders have the option to buy or sell bonds in the secondary market at CSX when they need cash, which makes bonds more attractive than simply depositing money in a bank.
II. Priority in receiving repayment
In the event of an issuer's bankruptcy, bondholders receive priority in payment over shareholders, which makes bonds an attractive option for risk-averse investors who seek to protect their capital while still generating passive income.
IV.The negative correlation between stocks and bonds enables investors to diversify their portfolios
During a global economic crisis, bonds may increase in value as investors seek safer investments, while stock prices may decline. This negative correlation between stocks and bonds helps protect investors’ portfolios through investment diversification.
***Disclaimer: This article has been compiled solely for informative and educational purposes. It is not intended to offer any recommendations or as investment advice. The SERC and Phnom Penh Post are not liable for any losses or damages caused by using it in such a way.
