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Interest heats up in commodities trading
Commodity trading has become an essential investment channel for enterprise production, according to experts attending a conference held in the capital on Saturday.
Commodities have been traded in Viet Nam since 2001, with some banks offering hedging services.
Many agree that commodity trading has struggled to gain popularity due to businesses not seeing its full potential, some even withdrawing from the market following initial losses.
"Managing trading risk will always play a very important part in a trader's success," said Frederick Wee, an exchange and brokerage expert at Ong First Tradition in Singapore.
"Just like bond or stock markets, the commodity market is populated by those who speculate in commodities to benefit from arbitrages," Wee added, warning investors of fraud risk and advising them to "be extremely vigilant in thoroughly researching commodity companies."
Wee pointed out various mistakes that companies normally make, the four largest ones including having no trading plan, inadequate trading assets, improper money management and unrealistic expectations.
"The commodity market is where trading meets the needs of society, it cannot but develop," said Nguyen Duy Phuong, general director of the Viet Nam Commodity Exchange (VNX).
"On stock and real estate markets, investors profit by purchasing at low prices, making sales when prices again increase. Unlike these two channels, commodity trading creates profits when the market goes both up and down," Phuong added.
While businesses had the opportunity to purchase and use each other's products more easily via commodity exchange than imports, Phuong said, Viet Nam still had export advantages in terms of coffee and rubber. "In exporting coffee and rubber, trading through commodity exchange will help reduce costs, vital for surviving in a difficult economic period."
Seeing as the VNX now implements margin trading, investors who wish to participate do not need large amounts of capital.
"Amidst restricted money supply, commodity trading is very suitable," Phuong stressed, adding that to further develop Viet Nam's commodity market, in addition to seeking funding from financial institutions, the VNX was co-ordinating with enterprises to boost operations.
The VNX currently exchanges rubber, coffee and steel on the basis of forward and future contracts while also planning the deployment of option contracts in the near future.
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