Snake on side of road On Nut

[Phronesis]

I am contemplating a move to Cambodia. I have carried out a good deal of initial research already.

I have noticed that most big banks in Cambodia offer accounts to foreigners. You can use the local currency or USD.

The rates for these accounts are very enticing. For example:

12 month term deposit for USD circa 7-8%

12 month term deposit for local currency circa 10-11%

I am well aware that the high rates are a reflection of the perceived risk of banking stability in Cambodia.

I am also aware that the premium rate on the local money reflects its status as a "soft" currency.

Anyway, it would be great to hear from anyone who has opened accounts in Cambo regarding:

1. The logistics of opening their accounts

2. Their opinion of the actual risks...real or imagined...

3. Any tips in general for parking up some cash in Cambo

Thanks in advance for your replies

[Phronesis]

Hmm...131 views but not a single reply....anyone???...anyone???

[7by7]

This is the visa forum, maybe do better in the banking one.

[missionrat]

Well I don't have experience with CDs in Cambodia but, as a former financier and currency speculator, I can tell you that you are exposing yourself to both inflation risk and currency fluctuation risk.

For starters, Cambodia has a very volatile inflation history. Look at its historical yearly inflation since 1990 to get a sense of it. Second, current inflation is 5%, which means that the "real" return on a 7% deposit is only 2%. Still better than the recessionary west but is a 2% worth the risk you are taking on?

Second, I don't know what your home currency is but at some point you will presumably want to repatriate your funds, no? If so, how confident are you that the Cambodian currency will stay flat or strengthen against your home currency? A move of 3-5% of a currency pair is very common in a give year. A 4% move against you (ie a drop in Cambodian currency versus your home currency) would now render your small 2% real return into a 2% real loss.

So unless you have strong reason to believe that inflation will stay steady or decline, that Cambodian interest rates will increase, or that the Cambodian currency will appreciate, I would stay away.... And that is to say nothing of the stability of the Cambodian banking system (another risk which you've already alluded to).

[12DrinkMore]

Well I don't have experience with CDs in Cambodia but, as a former financier and currency speculator, I can tell you that you are exposing yourself to both inflation risk and currency fluctuation risk.

For starters, Cambodia has a very volatile inflation history. Look at its historical yearly inflation since 1990 to get a sense of it. Second, current inflation is 5%, which means that the "real" return on a 7% deposit is only 2%. Still better than the recessionary west but is a 2% worth the risk you are taking on?

Second, I don't know what your home currency is but at some point you will presumably want to repatriate your funds, no? If so, how confident are you that the Cambodian currency will stay flat or strengthen against your home currency? A move of 3-5% of a currency pair is very common in a give year. A 4% move against you (ie a drop in Cambodian currency versus your home currency) would now render your small 2% real return into a 2% real loss.

So unless you have strong reason to believe that inflation will stay steady or decline, that Cambodian interest rates will increase, or that the Cambodian currency will appreciate, I would stay away.... And that is to say nothing of the stability of the Cambodian banking system (another risk which you've already alluded to).

As you started the post

http://www.thaivisa.com/forum/topic/572235-suggestions-for-a-26yo-with-19-million-retiring-to-thailand/

it is difficult not to think you are talking out of your arse.

However, moving on,

http://www.acledabank.com.kh/kh/eng/pb_defixeddeposit.php

Does indicate very attractive interest rates on USD and THB.

I guess that Cambodia needs some forex to pay for the foreign trade. But whether there is any depositor protection on USD and THB accounts I don't know, probably not.

And I know even less about the Cambodian currency, except that USD was widely accepted and seemed to be the preferred medium of exchange.

[GreenSnapper]

Actually the Riel was quite stable vs. US$ during the last 5 years.

+- 5% fluctuation, currently 4100.

[Naam]

Actually the Riel was quite stable vs. US$ during the last 5 years.

+- 5% fluctuation, currently 4100.

correct! exactly 5 years ago the rate was 4000

For starters, Cambodia has a very volatile inflation history. Look at its historical yearly inflation since 1990 to get a sense of it. Second, current inflation is 5%, which means that the "real" return on a 7% deposit is only 2%.

for starters... measuring the "real" return of a currency by subtracting inflation from interest rates is a useless academic procedure because it does not necessarily affect the actual investment results (as a view at the long term exchange rate USDKHR clearly proves).

disclaimer: this is a factual statement and not an advice to invest in KHR!

[jbrain]

Well I don't have experience with CDs in Cambodia but, as a former financier and currency speculator, I can tell you that you are exposing yourself to both inflation risk and currency fluctuation risk.

For starters, Cambodia has a very volatile inflation history. Look at its historical yearly inflation since 1990 to get a sense of it. Second, current inflation is 5%, which means that the "real" return on a 7% deposit is only 2%. Still better than the recessionary west but is a 2% worth the risk you are taking on?

Second, I don't know what your home currency is but at some point you will presumably want to repatriate your funds, no? If so, how confident are you that the Cambodian currency will stay flat or strengthen against your home currency? A move of 3-5% of a currency pair is very common in a give year. A 4% move against you (ie a drop in Cambodian currency versus your home currency) would now render your small 2% real return into a 2% real loss.

So unless you have strong reason to believe that inflation will stay steady or decline, that Cambodian interest rates will increase, or that the Cambodian currency will appreciate, I would stay away.... And that is to say nothing of the stability of the Cambodian banking system (another risk which you've already alluded to).

As you started the post

http://www.thaivisa....ng-to-thailand/

it is difficult not to think you are talking out of your arse.

However, moving on,

http://www.acledaban...ixeddeposit.php

Does indicate very attractive interest rates on USD and THB.

I guess that Cambodia needs some forex to pay for the foreign trade. But whether there is any depositor protection on USD and THB accounts I don't know, probably not.

And I know even less about the Cambodian currency, except that USD was widely accepted and seemed to be the preferred medium of exchange.

Why would a bank pay a interest on a foreign currency much higher as the rate they could borrow that currency for ?

[Naam]

Why would a bank pay a interest on a foreign currency much higher as the rate they could borrow that currency for ?

because the rating/standing of that bank does not allow cheaper borrowing.

[jbrain]

Why would a bank pay a interest on a foreign currency much higher as the rate they could borrow that currency for ?

because the rating/standing of that bank does not allow cheaper borrowing.

So are there substantial higher risks involved with investing in a US$ account with that particular bank compared to having as US$ account in Thailand or any other country for that matter ?

[Naam]

Why would a bank pay a interest on a foreign currency much higher as the rate they could borrow that currency for ?

because the rating/standing of that bank does not allow cheaper borrowing.

So are there substantial higher risks involved with investing in a US$ account with that particular bank compared to having as US$ account in Thailand or any other country for that matter ?

that goes without saying!