July 15, 2011

Cambodia's new bourse: Calves and cubs

[THE ECONOMIST]

The world’s smallest stock exchange

IF STOCKMARKETS are like casinos, as John Maynard Keynes argued, then the new exchange that opened this week in Cambodia has dealers but no cards, croupiers but no roulette wheels. The Cambodia Stock Exchange has no stocks to exchange, making it arguably the smallest bourse in the world (see table).

It opens six months after an exchange in neighbouring Laos. Both were set up with the help of Korea Exchange (KRX), which runs the third-largest bourse in Asia. It is animated by a vision of creating “one board” on which investors can trade securities listed on exchanges all over the world. The firm is now helping to modernise the Uzbekistan exchange and has even approached Myanmar.

The Cambodians hope three state-owned companies will list by the end of the year. If so, the exchange will vault over its Lao rival, which has only two stocks. (That has not stopped it compiling its own market index, the LSX Composite.) Even then, the Lao Securities Exchange would be bigger, measured by market capitalisation, than Mozambique’s exchange, the Bolsa de Valores Moçambique, set up in 1999 with the help of the Lisbon Stock Exchange and the World Bank. The BVM’s premises boast “lovely glasswork and a posh reception desk”, says Bruce Hearn of the University of Leicester. But they open only three mornings a week. Bids can be placed over the internet but it can take three months or more to find a seller.

Even Pat Shin of KRX believes some economies are too small to warrant an exchange of their own. In his view the thresholds are a population of 5m (Laos has over 6m) and an income per person of $300-500 (Cambodia’s exceeds $800). South Korea, he points out, opened its first exchange in 1956, only three years after the Korean war. It took ten years for the exchange to contribute much to development, he says.

It is not unknown for a stock exchange to open without any stocks. The Douala Stock Exchange in Cameroon had to wait three years for a debut offering, and no company could initially meet the Bulgaria Stock Exchange’s requirements. At least the Cambodia Stock Exchange has impressive premises in the country’s tallest building. Some mighty exchanges had much humbler beginnings. One even began under a Buttonwood tree.

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