A pepper farm at Binh Ba Commune in Ba Ria-Vung Tau province's Chau Duc District. (Source: VNA) Hanoi (VNS/VNA) - The development of a commodity exchange in Vietnamis expected to provide an alternative for investors when they find difficultiesinvesting in risky assets such as stock and real estate.
The number of active investors on the Vietnamese commodity exchange is stillsmall compared to stock and real estate markets.
The legal framework and the concept of commodity exchanging are reportedly thereasons that have restrained investors from taking part in this market.
Agricultural products traded on the global commodity exchanges include corn,wheat, coffee, sugar, lumber and rubber. Those products are also Vietnam’s keyagriculture produce.
Vietnam is among the world’s top agricultural exporting countries, whichaccounts for a large-part of all exports. Last year, total export value was up3.2 percent to 41.3 billion USD compared to 2018.
Of the total figure, key agriculture exports – including rice, pepper andcoffee – were down 5.3 percent to 18.5 billion USD in 2019. Those products arealso found on international commodities exchange platforms such as the TokyoCommodity Exchange (TOCOM).
The agriculture sector is more vulnerable this year because of a volatileglobal economy and international trade, which are also weighing on the stockmarket.
This has made investors look for alternatives with agriculture futures seen asa key opportunity.
According to the Mercantile Exchange of Vietnam (MXV), trading of Vietnameseagricultural products is similar to the derivatives market as investors willsell and buy futures contracts to earn profits from the price discount andpremium.
Coffee is one of Vietnam’s key exports but local exporters often suffer astheir selling prices are normally fixed and can be lower than the global priceson the delivery day.
The commodity exchange would help local firms overcome such difficulty andhedge the changes of the prices on the delivery, MXV deputy director Duong Duc Quangtold tinnhanhchungkhoan.vn.
An investor could either open or close his short/long options to sell productsat expected prices and diminish the risk of a lower price on the delivery date,Quang said.
Then the seller would no longer have to worry about the price changes asprofits had already been made, he said.
Futures prices were always transparent and it was difficult to manipulatetrading, Quang said.
According to MXV, the trading liquidity of the Vietnamese commodity market isrising. Since mid-2019, the number of new accounts on the market has increasedby 20-30 percent. The futures of agricultural products put up for trading onthe MXV’s platform are also linked to global prices.
“But the trading of Vietnamese agriculture commodities is still ‘physical’,”individual investor Tran Hoai Nam told Viet Nam News.
It meant the commodity was only transferred once a deal was reached between thebuyer and seller and the price was fixed by the delivery date, he said.
Unlike Vietnam, global investors would trade the future price of the commodity,which varies from the date the deal is signed to the delivery date, he said.
To promote the market in Vietnam, MXV planned to organise training programmesfor local investors, producers and exporters, Quang said.
The Vietnamese commodity market regulator had also worked with internationalfinancial institutions to provide tools to help trading become easy, convenientand simple as much as possible for investors, he said.
Once the account was activated, investors could participate in the marketimmediately and even make margin loans from financial firms to execute theirdeals, he added./.
VNA
