The Kingdom ‘may gain from hedge fund interest’

Prime Minister Hun Sen greets Credit Suisse Managing Director Andreas Gerber during a visit to Cambodia in 2017. The Swiss wealth management and investment bank has just released a survey revealing that the Asia-Pacific region is highly sought after by hedge funds seeking out new investment opportunities. Supplied

Cambodia stands to gain as the Asia-Pacific region (APAC) garners an increasing amount of attention from global hedge funds, according to business leaders.

Credit Suisse AG, a leading wealth management and investment bank, found in its “A New Dawn” survey APAC is the most sought-after destination for large hedge funds. The survey found that there was 55 percent net demand for investments in the region, far exceeding interest in the US, which stood at 20 percent.

“Seventy percent of investors plan to make changes to their portfolio in 2021 due to the current environment of lower bond yields,” the survey said.

It added that 61 percent of allocations over the last 12 to 18 months were directed to non-traditional structures, such as pre-initial public offering companies and private investments in public equities. The survey also said China was the most attractive destination for hedge funds to allocate their capital.

“Considering that globally foreign direct investment [FDI] plunged 42 percent in 2020, Cambodia, as Southeast Asia’s most attractive emerging market, remained unscathed thanks to the continued surge of investment from China,” Cambodian Investment Management Holdings Group Chief Executive Officer Anthony Galliano told Khmer Times.

Galliano stressed the investment in Cambodia is underpinned by China, which increased its FDI by 70 percent in 2020 to $860 million, saying that “Chinese money has greatly supported the economy during this extremely difficult time”.

However, he noted Cambodia needs to position itself for the coming wave of FDI after the pandemic is over.

Galliano said FDI flows in 2021 are anticipated to focus on cross-border mergers and acquisitions and healthcare rather than prevalent industries in the Kingdom.

Cambodia Derivatives Exchange Director Lawrence Kook agreed with Galliano’s assessment that the Chinese influence in Cambodia would play a role in future investments into the country.

“There is certainly strong interest among hedge funds to invest in Cambodia because of its geographical location in the region and the fact that it plays an important role in the Belt and Road Initiative,” Kook said.

“There is a strong financial appetite from the public sector because there are not that many local hedge funds in Cambodia and the international market wants to take advantage of the opportunity in Cambodia,” he added.

Kook stressed that international hedge funds entering the local market would very much be joining the market on the ground floor.

He added that Cambodia is not isolated from global trends. However the benefits may be limited because the Kingdom’s capital market is still young and must increase trading volume before hedge funds begin zeroing in on capital markets.

Rather, the Kingdom is poised to gain indirectly from the demand to invest in the region.

“As a manufacturing base, Cambodia is an attractive destination for companies that want to enjoy the low wages in the country so, in that respect, Cambodia will follow the international trend regarding demand for manufacturing in the region,” he said.

Kook added he would love to be involved in fund management in future working with the government under the structure of the Securities and Exchange Regulator of Cambodia and hedge funds, which would include foreign and local capital dedicated to bolstering the Kingdom’s infrastructure.

“There are different types of hedge funds and certain ones would do really well given the Cambodian context. For example, some of the roads in the country are in quite poor condition and they cause accidents and result in loss of life on a yearly basis,” he said.

He added that he would use the funds to work with the government for additional infrastructure projects. Many investors, including himself, have recognised the opportunities in Cambodia as it quickly develops its capital market.

“I think it is important to look at the derivatives sector as an example. It is only five years old and the growth has been spectacular so, while the impact on Cambodia’s capital market given the current interest may be indirect, the country is certainly poised to do well in the future”. Khmer Times