|
Domestic firms shun derivative trading
Businesses are mostly ignorant about derivatives, which can be used as a buffer against currency and interest rate fluctuations, argues Dr. Nguyen Thi Ngoc Trang from the Ho Chi Minh City University of Economics.
A survey of 250 firms by Dr. Trang found interest rate rises and foreign exchange fluctuations were the issues of most concern.
But the survey also found very few businesses used derivative products to protect them from these issues of concern.
Unlike shares, which are assets, derivatives are usually contracts – such as options, futures or swap contracts – or bonds.
According to Trang’s survey, poor understanding of derivative products was the main reason domestic firms did not use them.
In a report in Thoi Bao Kinh Te Sai Gon newspaper, Trang said Vietnam’s lack of a legal framework for derivatives was another hindrance.
“The government has no policies to encourage them [Vietnamese enterprises] to use derivative products,” Trang said.
“There are no official regulations to guide businesses on how they deal with derivative products in their accounts.”
Vietnam also lacks derivative experts and companies that provide derivative products, she said.
“Domestic firms don’t believe in derivatives, which can help reduce their risk, while also enabling them to predict their expenses in the future,” Trang said.
“Vietnamese firms are afraid of suffering losses but they are less eager to buy measures which can help them to avoid the losses.
“Some opt for derivatives in a bid to catch waves of profits only when there are fluctuations in market prices.
They are eager to stop using derivative when the profits aren’t as high as they expected.”
Trang also said most firms did not have anyone on staff who understood derivatives.
“Many importers can predict the losses they will have to suffer as the foreign exchange rates are spiraling upward.
But they struggle to find staff who can set up risk management projects to reduce the impact of foreign exchange rises on their operation,” she said.
Domestic companies also find instruction manuals about derivative products too complicated, Trang said.
“This shows that Vietnam lacks experts, who can explain the new type of investment simply,” she said.
Trang said Vietnamese firms were less willing to opt for derivative products as the companies believed the government, which sets the dong-dollar rate and interest rates, would protect them from currency fluctuations and high interest rates.
Trang recommended the government do more to encourage domestic firms to use derivative products.
Thanhnien
|
