KBank Research Flags Limited Financial Risk from Thai-Cambodian Tensions

 

KBank Research has recently published a report, "Summary of Financial Linkages Between Thailand and Cambodia in 3 Dimensions," presented by Kanjana Chokpaisansilp, head of Kasikorn Research Centre.

 

The report assesses the financial sector's exposure to Cambodia amidst ongoing close monitoring of the situation by various public and private sector agencies in Thailand.

 

KBank Research's initial findings suggest that Thailand's financial sector has limited direct linkages with Cambodia across three key dimensions:

 

 

1. Money Transfer and Payment Flow:

Electronic and digital money transfers between Thailand and Cambodia remain fully operational. Furthermore, hedging against foreign exchange (FX) risks for trade transactions between the two nations can be conducted via standard instruments.

 

This is primarily due to nearly 100% of international trade transactions being settled in US Dollars and Thai Baht, rather than the Cambodian Riel.

 

Data from Q1 2025 shows that approximately 68.6% of Thai export payments from Cambodian counterparts were received in US Dollars, with 31.3% in Thai Baht.

 

Conversely, 49.3% of Thai import payments to Cambodian suppliers were made in US Dollars, and 49.8% in Thai Baht.

 

Despite the effectiveness of FX hedging in mitigating some impacts, KBank Research acknowledges that other business concerns require close monitoring.

 

These include the liquidity of cash transactions, potential disruptions to trade and economic activities in border regions, and possible risks arising from Cambodian counterparties and businesses operating within Cambodia.
 

 

2. Investment in Cambodian Assets:

Currently, direct investment by Thai retail investors (through intermediaries) and mutual funds in Cambodian financial instruments is very limited.

 

The outstanding balance of all such investments is in equity instruments, which have seen a gradual decline over recent years.

 

As of April 2025, the total outstanding balance stood at a mere US$0.42 million, representing just 0.003% of the total foreign asset investments by Thai retail investors.

 

Notably, no Thai mutual funds currently hold investments in Cambodian financial instruments. This suggests that the direct linkage of Thai retail and mutual fund investments to Cambodian financial assets is relatively low compared to more popular foreign markets such as the US, Luxembourg, China, Japan, and Singapore.

 

 

3. Banking Sector Exposure:

Thai commercial banks currently offer financial services in Cambodia through branches or affiliated financial companies. These services encompass cross-border digital payments, QR code payments, deposit facilities, and loans to both businesses and individuals.

 

However, an analysis of the exposure of the five major Thai commercial banks in Cambodia reveals a relatively small proportion compared to their domestic operations.

 

Assets, loans, and deposits in Cambodia represent approximately 0.41%, 0.42%, and 0.26% respectively, of the total outstanding balances across the entire Thai commercial banking system.
 

 

KBank Research's preliminary assessment indicates that while developments in Thai-Cambodian relations require ongoing monitoring, particularly concerning border trade and economic activities, the impact on the Thai banking sector is expected to be manageable.

 

This confidence stems from two key factors:

1. Thai commercial banks adopt a cautious approach when expanding financial services abroad, meticulously considering resource availability and focusing on areas of expertise that align with trade, investment, and economic fundamentals.
2. Banks continuously and closely monitor and assess situations, as well as manage risks in their international operations. This proactive approach ensures that Thai commercial banks are well-equipped to effectively control potential risks arising from their business activities in Cambodia.