Vietnam Gold Market

VIETNAM GOLD MARKET

International Finance - Group 2Tran Cong Tuong

Le Xuan Long

April - 2011

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AGENDA

Overview of Vietnam gold market

Gold in eyes of government

Gold in eyes of producers

Gold in eyes of consumers (Vietnamese people)

Gold in eyes of investors

Gold in eyes of lovers

Overview of Vietnam Gold Market

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Gold Demand of Vietnam

Demand in 2010*: 81.4 tons ($ 3.232 million)

– Bar: 67.0 tons ($ 2.674 million)

– Jewelry: 14.4 tons ($ 558 million)

Gold kept among Vietnamese: around 500 tons ($ 19.852 million) (unofficial data)

World’s largest gold consumer (in term of per capita income)

– India and China: world's largest gold consuming (in term of value)

* Source: GFMS, WGC

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Gold Bar Demand (Q4 2010 vs Q4 2009)

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Jewelry Demand (Q4 2010 & Q3 2010)

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Import & Export

Strictly control by SBV

– Need official permits

– Quota

– Only for big gold firms

Official statistic: 1998 – Sep. 2010

– Export: 268.86 tons (22.4 tons per year)

– Import: 339.86 tons (28.3 tons per year)

Illegal import of gold (smuggling): 20-40 tons per year (unofficial data)

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Vietnam Gold Price (04/2010 – 04/2011)

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Vietnam Gold Price in Ten Years

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World Gold Price in Ten Years

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Return on Investment – Feb/2011 (monthly)

Gold in Eyes of Government

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Regulating Gold Market - Objectives

Stabilize macro-economy (inflation)

Utilize gold kept among Vietnamese

Eliminate gold as a means of payment in the economy

Control and stabilize gold market

Prevent gold smuggling

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Current Management in Gold Market

Shut down local gold exchanges

Ban gold trading on foreign accounts

Strictly control import/export gold

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Government's Resolution for Gold Market (Resolution 11/NQ-CP)

Stopping gold mobilizing and lending by credit institutions

– Still lend gold for producing jewelries

Strictly controlling the gold market

Closely monitoring & forecasting fluctuations of international gold price, gold supply & demand in domestic market

Submitting Decree on gold management and trading for certain major gold importers

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Government's Resolution for Gold Market (cnt.) (Resolution 11/NQ-CP)

Prohibiting gold bar trading

Inspecting speculation, hoarding and manipulation in gold market

Revising the regime of administrative penalties against violations in gold trading

Enhancing supervision and dealing with violations of gold trading of institutions and individuals

Gold in Eyes of Producers

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Gold Producers

Gold companies

– About 20 big firms: SJC, PNJ, SBJ, AJC…

Gold shops

– Thousands of gold shops in Vietnam

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Gold Products

Gold bar

Jewelry

– Ring

– Earrings

– Bracelet

– Pendant

– Chain

– Necklace

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Gold Bars

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Gold Jewelry

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Suggestions for Gold Management *

Not forbid the gold bar trading, just tough conditions

– Charter capital: 30 billion VND

– Annual revenue: 500 billion VND

Physical gold bar trading to be limited, gold trade on account

Establish national gold exchange

Gold trade account in foreign countries

Raise import tax (0%->0.5%), decline export tax (10%->0.5%)

* Source: Vietnam Gold Traders Association

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Suggestions for Gold Management (cnt.)

Create new forms of gold trading

– Physical gold trading (current)

– Exchange-traded funds (ETFs),

– Investments through accounts

– Gold derivatives

Sustainable and long-term policies for gold market

Gold in Eyes of Consumers

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In Eyes of Vietnamese People

Gold is very special to Vietnamese people

Any precious thing is considered as gold (quí như vàng)

– Silent is gold (Im lặng là vàng)

– Girl’s virgin is considered as gold (Mất cái ngàn vàng )

Gold jewelries are used in special occasions:

– Gifts for wedding

– Tet holiday

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In Eyes of Vietnamese People (cnt.)

Gold was a common unit of price

– Real estate transaction

– Motorbike transaction

Gold is a great stored of value

They keep track of gold price so closely

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Why Does Vietnamese Keep Gold?

Gold price tends to rise over time (a stored of value)

Gold divided into extremely small portions, easily transported & kept for a long time

Gold purchased & exchanged easily

Dong devaluation

Gold in Eyes of Investors

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Who are Gold Investors?

Central banks

Gold speculators

Financial institutional organizations

Gold producers

Private investors

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Why Do We Invest in Gold?

Gold as portfolio diversifier

Gold as an inflation hedge

Gold as dollar / VND hedge

Gold as safe haven asset

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Investment Vehicles in Gold Market

1. Gold bars / coins

2. Gold exchange-traded products

3. Gold accounts

4. Gold certificates

5. Gold futures and options

2, 3, 4 and 5 are forbidden, 1 is going to be prohibited in Vietnam

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Factors Influenced Gold Price

Central banks’ decisions

Inflation

Interest rates of USD, EUR

US economy

Oil price

Crisis

Demand & Supply

Investor’s psychology

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Investor’s Psychology - Crazy for Gold

Crazy for buying / selling gold

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Investor’s Psychology - Crazy for Gold (cnt.)

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Gold Investment Strategies

Fundamental analysis

Technical analysis

Gold versus stocks

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Risks Associated with Investing in Gold

Market risk

Legal risk

– Changed policy

– Foreign gold account

Risks related to quality of gold

Gold in Eyes of Lovers

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Lovers’ Conversation

Male: Will you marry me?

Female: How much gold do you have?

Q & A

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Preferences

World Gold Council, http://www.gold.org/

http://www.kitko.com

http://www.sjc.com.vn/

Saigon times http://www.thesaigontimes.vn