Sunday 05 February 2023

Vietnam designs US-style commodity exchanges

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The Vietnam Rubber Group (VRG), the Vietnam National Coffee Corporation (Vinacafe), the Vietnam Commodity Exchange (VNX) and Straits Financial from Singapore have recently signed a memorandum of understanding (MOU) on the cooperation to operate commodity trading floors in Vietnam.

Under the MOU, VNX will be mainly responsible for creating the regulations for the operation of the rubber & coffee trading floor, expected to become operational in October or November.

The trading floor will operate under auctions, which means that the transactions will be made on the basis of matching orders to sell and orders to buy to be placed by customers.

The trading floor, to be opened from Monday to Friday, is hoped to bring a new fresh breath of air to Vietnam’s commodity market.

Nguyen Duy Phuong, general director of VNX, said trading goods through commodity exchanges is a modern trade activity.

Making transactions through commodity exchanges will give enterprises and farmers an ‘insurance facility’ which allows to minimize the risks in production and business, such as the fluctuations of the coffee, rubber, steel and fiber prices.

Meanwhile, trade companies and importers/exporters, through exchanges, can obtain information about commodity prices so as to take initiative in planning their production and business.

However, despite the benefits, some analysts are doubtful about the feasibility of the trading floor plan.

The Ministry of Industry and Trade some years ago granted operation licenses to two commodity exchanges – VNX and Info. However, only VNX still exists, while sellers and buyers don’t intend to meet each other on trading floor.

Dinh The Hien, a renowned economist, noted that Vietnamese are still not familiar with trade via trading floors, and still prefer making transactions in traditional way, making deals directly with each other, delivering goods and receiving cash instead of going through commodity exchanges.

Since Vietnamese enterprises have limited capital, some have to borrow capital from banks, mortgaged with farm produce. This is why enterprises cannot take the initiative in goods supply when trading on floors.

Hien also said it would be better if the State allows Vietnam’s commodity trading floors to connect international trading floors and allows foreign investors to join domestic floors.

Do Ha Nam, deputy chair of the Vietnam Coffee & Cocoa Association, noted that the operation policy of the commodity trading floor in Vietnam remains unclear, which worries businesses about the benefits they can expect when making transactions.

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