Gold futures trading seen as a safe bet in Vietnam

Ho Chi Minh City, Jan 28 | Updated: Jan 29 2008, 06:01am hrs
Business is brisk at the Saigon Gold Exchange in a grimy neighbourhood of Ho Chi Minh City as Vietnamese investors bet on gold amid a turbulent stock market, rising inflation and currency concerns.

While historically Vietnamese have invested in physical gold, buying up gold bars and even buying houses with gold, they are now looking to gold futures as a cheaper way of investing in a precious metal seen as a safe bet in uncertain times.

Professional trader Truong, who asked to be identified by only one name because he wanted to keep a low profile, buys and sells about $200,000 worth of gold futures a day at the exchange, a small room where customers crowd around a single 14-inch flat screen which displays buy and sell orders and international prices for gold, crude oil and silver.

Physical gold investment is highly risky these days because it requires a big investment, but more and more investors are switching to gold futures trading from the stock market, he explained.

Gold futures provide more liquidity than stocks and are more attractive than physical gold because you only need to pay 7% deposits, lessening the need for capital, he added.

The exchange, which is run by Asia Commercial Bank, is the only gold exchange in the Communist-run Southeast Asian country. Opened in May 2007, its daily transactions average about 90,000 to 100,000 taels, worth about $100 million.

While gold jewellery purchases in Vietnam have fallen 30% in the past year, purchases have risen for gold bars, or taels, which are stored away as the best protection during times of economic uncertainty.

And there is much of that going on at the moment in Vietnam. In December, inflation reached double-digits of 12.6%, far higher than other economies in Southeast Asia. The stock market is weakening and the dong will likely appreciate this year due to a soft dollar.