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Stock investors eye commodities exchanges
Truong Hai has been an active stock investor since 2005 and is a VIP client of a number of major securities firms in HCM City. But he's been prepared to give up on the domestic stock market for some time.
"The unexpected, random volatility of the stock market has become tiresome, and a lot of my capital is stuck in it," said Hai, noting that his brokers have been encouraging him instead to trade in commodities on the Singapore Commodity Exchange (SICOM) where, he added, "they say profits are easily had."
Dung Khanh, Head of the investment section for a well-known, HCM City-based securities company, said that he began trading in commodities on SICOM about a year ago.
"With commodities trading, various derivative tools are offered to let you take full advantage of profit opportunities," Khanh said. "With stock trading (On domestic markets), investors are just allowed to buy or sell, sell high and buy low."
Meanwhile, domestic and global economic uncertainties have made investors averse to the risks of securities trading, Khanh suggested.
"With commodities trading, a basic and disciplined analysis will allow me to profit," he said.
Dao Trung Kien, a Technical Consultant of the Buon Me Thuot Coffee Exchange Centre, concurred, saying that commodities prices depended mostly on productivity and the suppply-and-demand relation, making price analysis and trading easier.
But local commodities exchanges still perform poorly attracting investors.
Buon Me Thuoät Coffee Exchange Centre Deputy Director Vo Thanh Chau said that the coffee exchange traded dozens of lots of coffee daily, with each lot containing two tonnes of coffee. Unofficial data showed that total coffee volume traded in the centre was about 1,368 tonnes, generating a turnover of US$65 million so far.
"The figure is quite modest compared to the attractive margin trading rate of 15 per cent offered at the centre," said an analyst from a securities company which has opened a commodities exchange on the local market, who asked to have his name withheld.
"Almost all of the traders on this exchange are small ones who spend a small amount of money in it," he said. "The bigger investors are simply not interested in local commodities exchanges."
He also noted the Chinese lesson in setting up commodities exchanges.
"In their heyday, China had dozens of small commodities exchanges, allowing investors to trade in everything from metals to energy to grains. As time went on, the exchanges gradually shut down due to the lack of a long-term development strategy, and today, the number of exchanges in China is far less."
Chong Kim Seng, Chief Executive officer of Bursa Malaysia Derivatives Berhad, told a recent conference on State administration of commodity exchanges that, to develop commodities trading, Malaysia set up a detailed plan which included many attractive incentives for foreign investors, including zero tariffs for foreign investors trading in both US dollars and ringit.
Bursa Malaysia Derivatives Berhad collaborated with many commodities exchanges in Malaysia and worldwide, helping it achieve a three-fold increase in trading contracts, Chong said.
He noted that a successful legal platform for commodities exchanges also included sufficient insurance provision to underwrite risks on futures contracts.
However, Pham Dinh Thuong, Head of the law building section for the Ministry of Industry and Trade, cited the obstacle from insurance providers in Viet Nam, where this kind of insurance hasn't been popular so far.
To boost commodities exchanges, the State should improve the legal system and set up an independent administrative unit with unified management, personnel management and training. Supportive policies should be set up, including strategic plans, public information, and enhanced market transparency.
"As a country rich in agricultural resources, the development of a commodities exchange is necessary to bolster the industry," said Thuong.
Dieu Thuy
vietnamnews
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