Slow start likely for infant bourse

What is Tong Yang Securities?
Tong Yang Securities is one of the leading investment banks (IBs) in South Korea. It has the largest branch network across the country and the largest retail market share in terms of cash management accounts. We have an outstanding specialty in bond markets; we have been the number one primary dealer in Treasury bonds and also took the first place in the corporate bond market in the first quarter of this year. We have maintained our strong position in almost every IB business, including IPOs.

What preparations are you making ahead of the launch of the Cambodian stock market?
We are carefully assessing the potential of the Cambodia market and setting up an IB practice here. We already have three years' experience in Cambodia and believe we are well ahead of others in preparation for the Cambodia stock exchange.

What exhange-related businessed will you conduct?
We will be an investment bank and financial services company, providing the entire range of services to companies who want to go public on the stock exchange. We will also offer other financial services, such as corporate finance, stock market-related financing services and brokerage services.

How do you rate the exchange's prospects?
It is a little too early and difficult to forecast the future of the new Cambodia Stock Exchange (CSX). However, when we look at neighbouring countries like Vietnam and China, we can somewhat imagine the future of CSX 5 or 10 years down the road. The Vietnamese market was established in 2000, almost 10 years ago, and it started with only two listed companies. Now, almost 400 companies are being traded. And 20 years ago, the Chinese market was opened with only 14 listed companies; now more than 1,000 companies are being traded. By simply comparing these countries with Cambodia in terms of the size of the economies and history of stock markets, we can expect the CSX to have around 40 to 50 companies on the board after 10 years, even though we may only start with a couple of companies.

What must local companies do if they hope to list?
There are several concerns that local companies have when it comes to going public on the stock exchange because for too many years most local companies have operated in a traditional local business environment. [This is characterised by] family businesses, a local standard of accounting, and informal management skills or strategies. There are many issues we should address, but some companies - though not every company - have already met the requirements to go public. But many still need to upgrade their management standards.

The government says it plans to launch the exchange by year end. Do you think any companies will be ready to list then?
I am not in the best position to answer that question, though it will be a little more realistic to say that we still need at least three more months after the complete system is in place. In other words, even if some companies have completed internal IPO preparations and are ready to apply for a listing, those companies still need to go through application, registration and approval processes, and that will take a couple more months. So let's wait until we see the entire system is ready.

Are you currently preparing any companies for an IPO?
We are helping several companies in their preparations for going public, both state-owned enterprises and private companies. We are at the stage of signing contracts with some of them, but this is confidential.

What fees do you charge?
It varies. Each company has different issues to be dealt with, and the size of the IPO is another variable when it comes to the fee, but it is normally between 3 percent and 5 percent of the capital increase resulting from the IPO. For example, if one company successfully sells its shares and increases its capital by $100 million, we charge between 3 and 5 percent of that.

What obstacles are in the way of the stock market?
It is not so much obstacles but challenges that need to be addressed. Information and education continue to be provided to the public. Training programmes need to continue until we have sufficient well-trained human resources in place. A legal framework and accounting standards are still needed. I understand the Cambodian government is working very hard to address these issues, but the private sector also needs to participate and cooperate with the government on this national project.

Finance Minister Keat Chhon has raised concerns that many local companies have no intention of joining the stock market because they are worried that it will make it impossible for them to avoid paying taxes. Do you share his concerns?
I understand what his concerns are about. It is true in part that there are still many local companies that are reluctant to become public companies. I guess it is mainly because they have for too long been settled in the traditional family business environment. However, I believe many intelligent entrepreneurs will soon understand when it is right time for them to change and adapt to the new environment.

Most companies in Cambodia, and even state-owned companies, have never released their financial statements publicly. Do you think they will change their habits if they go public?
The listed companies will be required to release all information that concerns their public shareholders. This is the most important responsibility of public companies towards their public shareowners. And local companies will realise that transparency will eventually take them to a global standard where they can survive and prosper in this tough, competitive world.

Some experts have said that Cambodia does not have the required number of qualified people to establish the securities market by year's end, and that South Korean leaders and experts will be required. What is your view?
I believe that no country has ever had enough resources and experience when they started their stock markets. What we are talking about is the beginning of a long-term national project. We are talking about giving birth to a baby, not a mature adult of a stock exchange. We may only start with a couple of companies on the board at the beginning stage, and then we need to continue to develop the project by providing good education, protection and nutrition etc. But I have no doubt that Cambodia should have a stock exchange now.

From: