Government to borrow $300m from investors next month

The Ministry of Economy and Finance (MEF) announced on Wednesday that it will borrow $300 million from the public and institutions by issuing its first three types of government bonds eight times from September to the end of this year. . Those who hold a bond certificate are government creditors for a period of time and will receive interest rates called coupon rates and principal called face value based on the auction, according to a statement from the MEF.

The MEF, through the National Bank of Cambodia (NBC) as trustee, will issue the government bonds with a face value of USD 250 per bond certificate for options of 1, 3 and 5 maturities at fixed coupon rates set by auctions that will allow investors to receive redemption. of their principal at the end of each maturity after payment of interest or coupons once every six months depending on the number of “actual” days from the date of purchase of the bond, the statement said.

The statement said the one- and five-year bonds will each be issued for approximately $24.57 million twice and each time will take four weeks to complete, while the three-year bonds will be issued at approximately $49.11 million for four times and each time will also take four weeks, representing approximately $300 million of the total bond value.

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“Investors who buy the government bonds will be incentivized with the half-payment of the withholding tax on the interests they hold and/or the purchase-sale of the government bonds and the exemption from the capital gains tax from buying and trading government bonds for three years,” the statement said highlighted along with other benefits in banking in Cambodia.

Hong Sok Hour, CEO of Cambodia Stock Exchange (CSX), said Khmer time yesterday that the MEF polled twice and found that most investors prefer bonds with three-year maturities to the rest, meaning demand for the midpoint of all three options is high. However, the first government bonds will especially like not to be traded but listed on CSX because NBC will be responsible for all the sale-purchase procedures of these bonds.

Sok Hour went on to add that the government does not offer longer term options such as 10-year bonds most likely because interest rates in financial markets in Cambodia and the rest of the world rose following the Federal Reserve – the US central bank – and European central banks raising the benchmark rate to curb high inflation.

“The longer the maturity, the more money the bond issuer will pay out to the bond certificate holders, especially when the interest rate is rising and currently interest rates are relatively high,” he said. he said, adding that there are still procedures to follow before government bonds can be listed on the stock exchange.

The bond certificate can be traded at a higher, lower and identical coupon rate between investors who can trade with each other by comparing the coupon rate with market rates and assessing market demand for the certificate placed in their trade, said Sok Hour, adding that the first government bonds are unlikely to be traded on the exchange because the first issue is prepared by NBC before coming to CSX.

“In fact, the coupon is not written on paper, but it is a system and will not be printed and then written with the coupon rate. It is a system that will allow entering coupon rates at any time after the rate has been fixed based on a successful auction for listing. But after listing, the rate will be fixed until the maturity date set for each bond certificate,” explained Sok Hour.

The MEF and NBC will prepare a set of procedures or notifications for investors to follow to invest in government bonds before each offering, according to Sok Hour, who added that most investors in government bonds are institutions. banking and financial because the amount of the investment is significant. .

“There is another mechanism that allows small investors, who are mainly individuals in large numbers, to be able to invest in such bonds, because the government cannot work with a large number of people like that. Thus, the mechanism through a depositary agent will help to reduce the administrative burden on the government because the depositary agent is the representative of a large number of individual investors,” he explained.

Securities and Exchange Regulator of Cambodia (SERC) recently approved in principle the operation of public securities for Cambodia’s first listed commercial bank, Acleda Bank Plc, as a depository agent in the securities industry, allowing the bank to act as a broker in public securities. for investors in government securities that are non-banking and financial institutions.

Buth Bunseyha, Executive Vice President and Group General Counsel of Acleda Bank, said Khmer time yesterday that the first stage of the government’s plan to issue government bonds fixes banking, financial and insurance institutions only by including Acleda Bank itself as targets, and the next stage will also be open to the public to invest.

“At first, government bonds will be issued for investment by these legal entities, but other companies that have the approval of the Ministry of Finance can also invest in this option… I would like to appeal and encourage investors to participate in this investment so that it will be developed very soon and be very fresh for our country,” Bunseyha added.

  • Key words: investors, national debt
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