The Ministry of Economy and Finance (MEF), Securities and Exchange Regulator of Cambodia (SERC) and Cambodia Securities Exchange (CSX) have been working together on a new mechanism that will allow CSX to operate as an issuing agent for government bonds, according to senior officials of SERC and CSX. The new role of CSX will be in addition to the National Bank of Cambodia, which has been entitled to issue government bonds.
MEF has listed the government bond on CSX’s profile listing format without the requirement for getting approval from SERC as per applicable laws and regulations but it is not for trading among investors. Therefore, it is required that CSX revise its listing rules for this type of bond if the government seeks to have its bond traded, said senior officials.
Profile listing allows the public to just explore necessary information about the government bond issuance on the public platform of CSX, but the bonds would not be tradable among investors on the stock exchange’s trading system, said the official, adding that the profile listing requires no listing event that can be organised at the bourse or anywhere else.
Kim Sophanita, Director of Market Operations at CSX, told Khmer Times on Wednesday that MEF, SERC and CSX have been working together on the Proclamation of Government Bond Issuance at CSX—Cambodia’s stock exchange operator established through the joint venture between the Cambodian government holding 55 percent of the stakes and the Korean Exchange owning the remaining 45 percent.
“We are now working with SERC and MEF on the Prakas of Government Bond Issuance at CSX in which CSX will become another issuing agent of the government bond in addition to NBC. For the listing and trading of government bonds in the secondary market, we’re still waiting for the decision from MEF,” said Sophanita.
Sophanita also said that the management of CSX wishes to support the government by having the issued government bonds listed and traded among investors who need to access to liquidity given the stock exchange’s well-known market ecosystem and investor base. “We are ready to amend our listing rules to allow G-bond to be automatically eligible for listing in the stock exchange,” she said.
Further, she said that G-bond is considered a risk-free asset in investment because the government’s default risk is assumed zero, but it is always possible to happen for a corporate bond at some level according to its credit rating. “That’s why the return or coupon on a government bond is lower than a corporate bond,” she said.
“Under profile listing, the bond is listed in the exchange but can’t be traded. Profile listing allows the public to find government bond issuance-related information on the exchange’s public platform. That is why there is no listing event and no symbol is given if bonds are not listed,” she explained.
There are 72,100 government bonds in total that are listed on CSX’s profile listing format three times last year—December 16, 2022, November 17, 2022, and September 21, 2022, according to CSX. MEF listed the 41,800 certificates of the government bond issued and sold out of 1 million units through the first auction that proceeded early this month and was participated by eight banking and financial institutions who all got success in the auction at 2.2 percent of a single price.
Sou Socheat, Director General of SERC, also told Khmer Times on Wednesday that the Proclamation on Government Bond Issuance at CSX is still in the process between MEF and CSX. “I think the finance ministry is in the process to work on this with CSX,” said Socheat. The law on government bonds stipulates that MEF, not SERC, has a role to issue and list government bonds on the stock exchange.
“The procedure allows the ministry to work directly with the stock exchange without any approval from the regulator, according to the regulations,” said Socheat, adding that the law states that the issuance of government securities is the exclusive authority of the Minister of MEF under the supremacy of the Prime Minister.
“SERC could intervene in the secondary market where the government bonds can be traded after they were issued or sold in the prime market,” Socheat said.