Q2 banking and finance news snapshot
Cambodia’s stock exchange welcomed a new listing to its bourse in the second quarter, with Sihanoukville Autonomous Port becoming the fifth listed firm on the Cambodian Securities Exchange (CSX). Other events to make the headlines in the banking sector in the past three months included news the government was preparing legislation to regulate the establishment of a corporate bond market.
Cambodia’s capital market regulator, the Securities Exchange Commission of Cambodia (SECC), announced that it would suspend the issuance of new central counterparty licenses to derivatives trading firms, claiming that capping the market at four was sufficient to serve current demand.
The SECC said in an announcement that it would no longer accept applications for companies that act as clearing houses for derivative brokerage firms. However, it would still accept derivative brokerage applications to boost trading activity in the inherently risky sector.
Cambodia could expand its foreign trade by up to 16 percent, adding approximately $2 billion worth of exports, by complying with a new international trade protocol that aims to slice through the red tape that slows and complicates cross-border trade.
U.S Ambassador William Heidt said that Cambodia’s competitiveness would improve significantly once it fully ratifies all 12 articles of the World Trade Organization’s (WTO) Trade Facilitation Agreement (TFA).
With the interest rate cap of 18 percent in full force for all new and restructured microfinance loans after the National Bank of Cambodia (NBC) issued a populist measure to curb high interest rates, microfinance institutions (MFIs) are starting to give predictions for lower profits this year as the new lending reality takes hold.
The interest rate cap that came allegedly on the orders of Prime Minister Hun Sen himself requires MFIs to not lend above 18 percent as of April 1.
The National Bank of Cambodia (NBC) has signed an agreement with a Japanese firm to develop a blockchain-based payment system that could potentially allow for the regulated usage of a cryptocurrency, which would eliminate the use of formal financial institutions to send and receive money.
According to an announcement from the Japanese financial technology firm Soramitsu Co., the company signed a partnership agreement with the NBC to study the possible implementation of a blockchain-based open-development software known as Hyperledger Iroha, a product backed by the Linux Foundation, a US-based company that distributes the ledger technology program.
The volume and value of consumer credit applications increased nearly a third year-on-year during the first quarter of 2017 as a result of surge in mortgage and personal finance applications, according to the latest data by the Kingdom’s credit reporting agency, Credit Bureau Cambodia (CBC).
The number of credit applications grew 29 percent in number and 30 percent in value during the first three months of 2017, compared with the same period a year earlier, CBC said in its quarterly Credit Index report. Driving the growth was applications for mortgages, which grew 47 percent and saw their highest growth in the southern half of the country including Phnom Penh.
After several years of rapid growth, the expansion of credit provided by the Kingdom’s myriad microfinance institutions (MFIs) stalled abruptly last year, raising concerns poorer Cambodians could be pushed toward loan sharks to obtain credit or cover their debts, the World Bank said in its latest economic update on Cambodia.
It noted that credit growth in the Kingdom’s microfinance sector peaked in 2014 at more than 50 percent year-on-year before slowing to a crawl in 2016. The combined loan portfolio of all MFIs peaked in March 2016 before dropping to $3.16 billion by November. Total MFI credit growth capped out at just 4.7 percent last year.
Shares in Sihanoukville Autonomous Port (PAS), the state-owned enterprise that operates Cambodia’s only deep-sea port, debuted on Cambodia’s stock exchange after an initial public offering that raised $27 million.
The port operator became the fifth listed firm on the Cambodian Securities Exchange (CSX), with its stock trading as PAS. In total, it offered investors $21.4 million, or a 25 percent stake in the company, with shares priced at 5,040 riel ($1.26).
The government is preparing legislation to regulate the establishment of a corporate bond market that would give local companies a new debt instrument to raise capital for their operations or expansion.
“The government will soon be introducing corporate bonds that will complement the existing stock market,” Finance Minister Aun Pornmoniroth said. “Bonds provide an additional option for companies that need a large amount of medium or long-term capital in order to expand their business.”
The government unveiled its financial sector development strategy for 2016-2025, which provides stakeholders with a document to evaluate the last decade of growth while outlining an action plan for the next decade.
The financial sector strategy paper, its third version since 2001, consists of five chapters that recap development and proffer strategies for both banking and non-banking services such as the capital market and the insurance industry. It also highlights emerging challenges and constraints that need to be addressed over the next 10 years to accelerate financial inclusion.
A central online trading platform expected to launch by the end of the year will allow investors to trade securities listed on the local stock market using a desktop computer or smartphone.
Lamun Soleil, director of market operations at the Cambodia Securities Exchange (CSX), said the bourse is developing a Mobile Trading System (MTS) that will serve as a central web-based platform for local securities firms and their clients. He said brokerages will be charged a fee to use the service, which he claims will be more cost-effective than developing their own online trading platform.