Stock Exchange and Coffee in Viet Nam

These last few weeks, I have been gathering a lot of information on and learning about Viet Nam and its political economy.

Here are some trends on its market:

• “Vietnam’s stock market has been among the world’s leaders year-to-date.” The Vietnam Stock Exchange Index (VNI) has increased by 10.3% in January 2014.
• The reason that is attributed to this growth is due to a high level of foreign direct investment (FDI).  According to Andy Ho, Managing Director and Chief Investment Officer of VinaCapital, many countries are investing in Viet Nam is because it seems to be relatively more stable than many emerging markets. "Vietnam has basically shined above other emerging markets in terms of economic and political stability which has attracted a lot of investors to look at Vietnam," he says.
• The stability has lasted for 2 to 3 years now and is an indicator that Viet Nam is not such a risky invesmtment.
• International investors are looking for business in emerging markets, but there are only a few viable choices because of a lot of currency volatility in the emerging economies. “Vietnam, with a stable Vietnamese Dong against the U.S. dollar and no political unrest coupled with a steady and growing GDP and a large population becomes awfully interesting at this time,” Andy explains.

It seems that on the macro-level, in the perspective of one stock exchange fund, Vietnam seems to be doing well.  It has been receiving foreign investments, which increases capital into the country.

Source: Vietnam's Market Emerging Again With Vietnam Opportunity Fund's Andy Ho

Furthermore, I wanted to analyze Viet Nam on a micro-level too, on a related note to the stock exchange and my practice experience.  I decided to read an article about Viet Nam’s  coffee.  Who doesn’t love a cup of cà phê sữa đá (Vietnamese iced coffee)?  The price of coffee in the world comes from the New York and London Stock Exchange.  Within the past few decades, Viet Nam has become a large participant in the global coffee market, being behind only Brazil in exports.

An article from Business Recorder stated that “Vietnam coffee prices climbed about 2 percent to 38,500-38,600 dong ($1.83) per kg on Tuesday (February 24^th, 2014), the highest since August last year … ”  The increase in price is probably due to the drought and water damage that is occurring in other coffee-growing places in the world.

From what I learned from GPP 115 and “Black Gold,” the price of coffee is low, but still volatile.  Right now, Vietnamese growers and exporters are playing a game of when to best sell their coffee beans.  Should they wait to see if the price of coffee increases?  If they do that, there is always a risk that they will decrease.  But, as of now, the trend of coffee price seems to be positive.  However, they are hopeful that the price of coffee will continue to rise, maybe up to 45,000 dong.

Source: Vietnam’s Coffee Prices Jump

The following is a video of the role of coffee farming in Viet Nam.

The video demonstrates strong faith in the coffee industry in Viet Nam.  Trung Nguyen Coffee plans to dominate the coffee industry.  In addition, despite the Starbucks that opened in Saigon last year, the Vietnamese locals still prefer Vietnamese style coffee (individual drip coffees).

Overall, it seems that there are positive trends in Viet Nam.  The dollar is stable, as pegged to the United States dollar. There is strong foreign investment, which means that there is something about the country that seems to be viable in getting returns on investments.  However, these are just two aspects of a very complex society.  This is something that I must careful and critical about because even though these parts seem to be good, there are many parts in Viet Nam that may be disadvantaged.