Vietnam's Derivatives Market Continues Steady Development - Vietnam Briefing News (2024)

FAQs

Why not to invest in Vietnam? ›

Vietnam is a bureaucratic country. Numerous licences, permits and approvals are required by every business. This results in delays and additional costs to businesses. For large greenfield projects or those in sensitive areas, developments can take a long time.

Vietnam has a relatively small population size and a high median age of 35.6, indicating an aging population. The country's higher-than-average population growth rate aims to counterbalance this, making it an appealing market for manufacturing companies.

The wave of financial deregulation, technological innovation, and competition among market participants has further facilitated the development of derivatives. In addition, the cost-saving features of these products and the flexibility they afford investors and borrowers have fueled their expansion.

Financial derivatives are used for a number of purposes including risk management, hedging, arbitrage between markets, and speculation.

The primary social issues in Vietnam are rural and child poverty. Vietnam scores 37.6 in the Gini coefficient index, with the top 10% accounting for 30.2% of the nation's income and the bottom 10% receiving 3.2%.

Investing in Vietnam offers several benefits, including access to Southeast Asian markets. Some of the key benefits are: – Large emerging market potential: Vietnam's population of nearly 100 million people offers a significant consumer market with a growing middle class and increasing disposable income.

Singapore is the biggest investor in Việt Nam with a total registered capital of $2.55 billion, up by 51.3 per cent. A major project of Singapore is $662 million urban project Lumi Hà Nội.

Food and beverage processing is the largest industrial activity in Vietnam. Seafood is processed for export, while coffee and tea are processed both for export and for domestic consumption. Other beverages and a variety of condiments also are produced in significant quantities.

The main drawbacks of derivatives include counterparty risk, the inherent risks of leverage, and the fact that complicated webs of derivative contracts can lead to systemic risks.

What is the most traded derivative? ›

Stock index options were the most actively traded derivatives product in 2020, accounting for 25.8% of overall derivatives volumes. ETF derivatives: In 2021, 4.62 billion ETF derivatives contracts were traded.

The National Stock Exchange of India cemented its place as the largest derivatives exchange in the world in 2023. Mumbai-based NSE traded over 84 billion contracts in 2023, followed by the Brazilian B3 with 8.3 billion.

Another risk associated with derivatives is credit risk—the risk that the counterparty to the derivative contract will default on their obligations. If a counterparty defaults on a derivative contract, the investor may not receive the full value of the contract, leading to losses.

Definition of Derivatives

Derivatives are financial contracts, and their value is determined by the value of an underlying asset or set of assets. Stocks, bonds, currencies, commodities, and market indices are all common assets. The underlying assets' value fluctuates in response to market conditions.

Hedgers:

Role: Hedgers are participants in the derivatives market who use these financial instruments to manage or mitigate risk associated with price fluctuations in the underlying assets. Objective: Their primary goal is to protect their existing investments from adverse market movements.

With attractive economic growth and breathtaking scenery, Vietnam is an ideal destination for foreign investors, including real estate. However, the legalities of property ownership in Vietnam as a foreigner can be complicated.

Pollution: Vietnam grapples with significant pollution issues, particularly in its major cities. Air and noise pollution are prevalent, and the waste management systems require improvement. These environmental challenges can adversely affect your health and quality of life.

However, like any investment opportunity, there are risks involved when investing in Vietnam's property market. Factors such as legal complexities, fluctuating market conditions, and potential cultural differences should be carefully considered before making a decision.

So, the dong does not appear to be a good investment based upon its risk-reward profile either.” History also suggests buying dinars and dongs is not an effective buy-and-hold strategy either. “With transaction fees and spreads included, one would have lost money if they bought either the dong or dinar 10 years ago.